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Gold/Mining/Energy : Direct Focus Inc. (DFXI) -- Ignore unavailable to you. Want to Upgrade?

To: trilobyte who wrote (134)	11/2/1997 10:34:00 PM
From: Clement	Read Replies (1) \| Respond to of 768

Trilobyte, The information can be found in their balance sheet. Essentially capitalizing means that instead of expensing it (i.e. income = revenue - expenses), you add it to your assets, so that the most recent expense doesn't appear on your income statement. That's what BFX has done. What instead appears to be expensed is last year's marketing expense. On their Current Assets of their annual report, they have "Direct Response Marketing" and in the notes they say that they amortize that "asset" after a year. That is to say that they expense that amount a year after the fact. Some might say that this is somewhat unethical since it artificially reduces expenses which by all accounts have already been spent (they pay the their advertising agency up front), while they may be recognizing all income up front, arguably inflating current revenues when they may have to write off some bad debts in the future. You could file this under one of the games small companies play. The problem of course is that it always catches up to them -- one bad quarter and .... plunk -- the worst of both worlds happens -- large expenses from last year appear while revenues are less = possibly a large loss. That said, however, I think that Bowflex hasn't saturated their market yet but when they do... Clement ps the best way to recognize this is if cash flow differs greatly from income (ie the income is not cash), there may be a problem