AboutPaul Henneman Expertise Stock forecasting and fair market valuations.
Experience
Past/Present clients CBSMarketwatch.com, Hoovers.com, Multexinvestor.com, Bank of NY, numerous hedge funds and institutions, other partners and clients can be viewed at http://www.valuengine.com/about/careers.html
Question Hi Mr. Henneman,
I read in "Investing for Dummies" where a company's "Current Liabilities" shouldn't approach too close to it's "Current Assets", but the author didn't mention "How Close". What would be a figure,(ballpark or other), that one might consider as a "Red Flag" or "Warning Signal", in percentage or dollar amounts, to alert one that the Assets and Liabilities are getting too close? Also, "Value Line" mentions the percentage of "Senior Directors" and "Company Executives" invested in their companies. What might be considered a "Healthy Percentage" when assessing the amount of senior officials investing in their own companies? Thank you very much!
Sincerely,
Mike Eidson, Lac.
Answer Thank you Mike for your question!
Actually, there is not a clear answer. If assets and liabilities are the same or weighted to liabilities, this is clearly a red flag. But there are other issues to consider. Has the company been moving towards increasing assets or increasing liabilities over past quarters or years? Essentially I would argue that it is more important to see which way things are moving, and how quickly, than to look for an actual figure. But, if liablities are equal or greater than assets, that is scary enough to disqualify a company in my book.
The same applies to officers investing in their own company. There really is no red flag other than to see the majority of officers selling shares in their own company! Not a good indicator. But even if officer ownership is high, and the trend is for them to continue to increase ownership, this is a good sign. Officers of course know better than anyone the future prospects and/or problems of their own company. So rather than look for how much the currently own, look to see if they are increasing or decreasing that amount.
I hope this helps! Please do not hesitate to follow up with me if I can be of any further assistance!
Sincerely,
Paul Henneman
President
ValuEngine, Inc.
(800) 381-5576
