MB:
A topic close to my heart.
Just to add to the explanation;
Darling Co. Ltd. has been growing for quarters and the market loves it. But now the growth is slowing,...what to do?
No matter what, make sure you give Wall St some form of growth, so go out there and "buy revenues", i.e., buy some other company. Additional benefit,... Darling Co's. stock price is in the stratosphere, and is an acceptable deal-making currency.
Now for the fun. Not only will next quarter's revenue line be enhanced ("revs up 22% year-over-year"), but the bottom line will be enhanced even more, because of the writedowns that are taken. Example: inventory items that cost the purchased company say $100 to manufacture, and that are saleable at say $105, enter Darling Co's books at a VERY reduced value, consequently when these items are sold, the margins are massive. The same thing holds true with respect to the writing down of plant, R&D, etc, as then the cost of amortization is dramatically reduced, hence profits are falsely enhanced.
It's a wonderful scam which reflects the wisdom of a quote of a good friend, to wit: "If the market wants to buy blue suits, turn on a blue light". (g)
Best, Earlie |
