The Learning Company (TLC) Message Board

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Technology Stocks : The Learning Company (TLC)

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To: paul richards who wrote (5762)	9/22/1998 6:32:00 PM
From: paul richards	Read Replies (3) of 6318

this comment, goes to strengthen my assertion TLC cashflow was suspect: Factoring Receivables What do you think of The Learning Co. (TLC:NYSE) and its use of factoring receivables? Does it lessen the quality of its EPS? --Matt Brody Matt, "Factoring" your receivables is the corporate equivalent of selling your spring tax refund at a discount to H&R Block for instant cash instead of waiting a few weeks for the government to mail you the check. Generally, only desperate companies with liquidity issues would willingly let some high-risk finance company gouge out their eyeballs just to collect on their bills a few months early. Ironically, the process has no effect on a firm's EPS figure. Income generally is recorded on the books at the time a sale is made, not when the money is collected. That's why it's important to check the current ratio to see how well a firm can meet its daily obligations. (See my earlier current ratio discussion.) For The Learning Co., the current ratio is under 2 and has been for several years. In addition, the firm hasn't made a profit since 1994 and its losses seem to be mounting. At a price-to-book of 20, I'd say this firm has some fundamental issues.

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