Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Contrarian Investing -- Ignore unavailable to you. Want to Upgrade?

To: Elroy who wrote (53)	9/13/2006 4:22:25 AM
From: bruwin	Respond to of 4080

Yes, Elroy, I agree that IF a company can earn more as a result of its borrowings, then that is not a bad thing. What I was alluding to was a large Long Term Debt number on a company's Balance Sheet, relative to its Total Equity, that resulted in an "excessive debt expense" on its Income Statement. If a company needs to borrow large amounts of cash because it's not generating enough from its own business to finance its needs, then it should probably re-assess its Business Plan. My phrase "I like to see no debt on a company’s Balance Sheet" was in support of pcyhuang’s comment in his Message #5 where he referred to "practically no debt on its (NTE’s) balance sheet". Needless to say, it’s unlikely that one will generally see no long term debt on a company’s Balance Sheet, and maybe I should have rather said "as little debt as possible", or something similar. I don’t see debt as detrimental. I just like to see it used, as you suggest, to enhance a company’s business, and not to introduce too much expense into the Income Statement. Personally, I look at the ratio between "Interest Expense" and EBITDA. If that gets too big then I look elsewhere to invest my money.