CASH FLOW 2
downturn came out scarred. Sure, they made it through, but at what cost? Did they have enough cash available on their line of credit to ramp up needed inventories and start production for customers? For Farrar Corp., Manhattan,
M
Kan., two opportunities arose that allowed the company to increase capi- tal and keep pace with its customers’
24 | MODERN CASTING June 2012
any metalcasters that survived the recent economic
Ways to Improve NOW
Farrar Corp., Manhattan, Kan., found working capital via the research and development tax credit and a cost segregation study. Other metalcasters can do the same. KRAIG VONDRAN, FARRAR CORP., MANHATTAN, KANSAS
rising demand—the research and development tax credit and a cost segregation study. Until early 2011, Farrar had not
considered either avenue. Since pursuing the opportunities, its cash flow has seen a positive increase of $390,000. As an iron casting facility with $25 million in revenues, this was a substantial sum.
R&D Tax Credit Overview Te research and development
(R&D) tax credit was created by Congress as part of the Economic Recovery Tax Act of 1981 to encourage American industry to invest in R&D. Te Internal Revenue Service (IRS) describes the R&D credit as follows: “Te expenditures of R&D are rea-
sonable costs you incur in your trade or business for activities intended to provide information to help eliminate uncertainty about the development or improvement of a product…Whether expenditures qualify as R&D expen-
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