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Politics : Ask Michael Burke

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To: Thomas J Pittman who wrote (22201)	9/3/1997 3:36:00 PM
From: Knighty Tin	of 132070

Thomas, I always worry about debt. I never use the stuff personally and don't like to see my companies do the same. But I think this is a case for ratio analysis. If they take on debt, but it adds to total equity, then what is the new ratio and has the new takeover made it more debt-heavy on a ratio basis? In other words, if I have 100 million in equity (I wish) and 50 million in debt (my bank wishes), and I buy a 20 million company for 15 million in stock and 5 million in debt, my debt has gone up, but my ratio of debt to equity has gone down. Also, you have to watch cash flow, especially free cash flow. Always calculate Ebitda as well as eps for a co. MB

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