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Strategies & Market Trends : Turnarund Investing

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Aug 1 5:00 PM EST

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To: Covenant who wrote (759)	4/29/2012 5:45:38 PM
From: grahamcracker	Read Replies (1) of 1876

<< You are confusing illiquidity with insolvency.>> Yep, sort of. And Investopedia has it half right as I recall (although they are not my source). They present insolvency as a cash flow issue which (as you note) is, as far as we know, not immediately an issue. It is also a balance sheet issue (which is your focus). I should have said that negative book value doesn't necessarily = insolvency and that we haven't a clue whether or not they are solvent as a matter of market value of assets versus the liabilities. All told, I concede your point and it recalls a point Ben Graham makes: "The first rule in calculating liquidating value is that liabilities are real but the assets are of questionable value."

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