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Rory, thanks for your scholarly discussion of the meaning of working capital, especially with regards to the restaurant business in general. Although Paul didn't specifically state any plans to take on more debt, he did say that if cash on hand is not adequate for all the expansion planned/available that the current positive cash flow situation would make debt financing rather simple to obtain if needed.(ie--good balance sheet, low risk fo rthe lender) If they do have promising opportunities I would like to see them take advantage of them as soon as possible, not be slowed down due to lack of funds. I can't define perfect leverage for acompany, , and I imagine it varies by business, but being underleveraged can be as bad as being overleveraged--decisions need to be based on cost of capital versus cash flow generated. An exhaustive review of these issues is "Valuation--Measuring and Managing the Value of Companies" by Copeland, Koller, and Murrin. I am, sure there are other good books. I happened to have read this one, and fro the way yu described working capital yu proably have a more full understanding of it than me anyway. But the double edged sword you mention--staying inbetween the dangerous blades is wha twe expect from management, and they seem to be doing well in that regard!! I feel badly there is no BJs near you--actually I live in between the Westwood store and the new Valencia location--we sure could use one right here!! |
