Auric,
Nice to see you are taking Accounting 101 during night school these days. A few questions:
1. AR has risen dramatically - a definite concern. Will part of this ultimately be written off as bad debt, or will WSTL have to find alternate meanings of finance to cover this short term liquidity crunch? If not bad debt, will WSTL have to further dilute their shares, or will the strength of their balance sheet/income statement allow them to secure a temporary line of credit? No further dilution required - they are much stronger than 12-18 months ago. Interest expense did decrease dramatically year over year
2. Are their debtors credit risks? Get real.
3. Valued at 3 times current revenues for 2001, is WSTL overvalued compared to the rest of the industry?
4. CPE revenues rose 50x year over year in a competitive environment. Margins usually don't increase with this sort of exponential growth, to say the least...
5. No apparent inventory problems. I would have more of a concern if inventory increased 100%, as opposed to receivables, during the current quarter, considering the outsourcing they recently announced. Huge increases in inventory, IMO, is a much bigger red flag than AR for a company that is losing money and has debtors that have credit risks - neither of which fits WSTL's description.
6. I like how you compare the income statement year over year, but the balance sheet quarter over quarter. A glass is always half empty.
7. Do you see DSL implementation increasing, or decreasing, over the the next 12-36 months? Will WSTL benefit, or suffer, from this trend? |
