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Biotech / Medical : GUMM - Eliminate the Common Cold
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To: Mad2 who wrote (4032)12/4/2001 10:49:30 PM
From: Mark Marcellus  Read Replies (2) of 5582
 
An investment quiz:

A company has 25 Million in cash and a market cap of 65 million. They have agreed to buy out their partner's 40% stake in the business. The NPV of the buyout money is approximately 16.5 million. The company is:

A) A screaming buy. It's selling for two times cash!

B) Buying out their partner for free because they would have had to pay them 40% of the profits anyway, and the partner would probably have welshed on paying their share of the expenses.

C) Buying out their partner for free because they'll be able to pay them off out of cash flow from growing sales, and we know that growth has a positive affect on cash flow.

D) All of the above.

E) A company with a history of failure, which has never achieved an operating profit, has no proven product, and whose future prospects are speculative, at best.

If you answered D), you qualify as a Junior Stock Analyst. You will soon receive your secret decoder ring, which magically erases all costs and liabilities from financial statements.

If you answered E), you are an evil short, you deserve to lose all your money, and you should be ashamed of yourself. It's people like you what cause unrest.

If you chose any of the other answers, you lack imagination. You need to study the work of successful Junior Stock Analysts in order to incorporate the proper level of imagination and speculative fervor into your work.
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