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Microcap & Penny Stocks : Financial Shenanigans: Stocks Looking for a Fall -- Ignore unavailable to you. Want to Upgrade?

To: majormember who wrote (5)	5/11/1998 8:30:00 PM
From: HeyRainier	Read Replies (1) \| Respond to of 108

Skane, RE: the comments and observations, I admit that trying to put something down will not be as easy or probably as fun as posting in other threads. What we're all trying to accomplish here is twofold: better profits, and establishing a better arsenal for tackling potential minefields in this market (i.e. education!). I'm here to learn too as we hear from some of the more experienced hands. I believe that in the development stages of the thread it might be appropriate to feed the readers a regular stream of examples and tips about how trouble brews in the financial statements of certain companies. One example comes from Roger's 1998 Short Picks thread. If you remember YURI when I mentioned it on The Rational Analyst, then you'll get an idea of the kinds of trouble we're looking for. Here's that excerpt from Mr. Babb's thread: exchange2000.com An excerpt from Financial Shenanigans, page 136: The Relationship between Sales and Accounts Receivable Whenever a company sells merchandise on account, it ships merchandise before it is paid for. In most cases, inventory growth should mirror growth in sales. That is, if sales are growing by 10 percent, accounts receivables should also be growing by about 10 percent. If accounts receivables are growing much faster than sales, it usually means that the company is having trouble collecting from customers. If the condition persists, the company will eventually experience negative cash flows. I also heard it being interpreted to mean that the company has been extending fairly generous credit terms to get their goods sold, thereby "stuffing the channel" for a short term boost in near term profitability, which comes at the expense of future periods. Please advise if this view needs revision and is incorrect. Finding this phenomena is as simple as reading the 10-K and comparing the changes in Sales and Receivables: we compare the percentage increase in sales to the percentage increase in receivables. Following the guidelines set above in the text, if we have the percentage increase in receivables be out of line with the percentage change in sales, then we have a candidate that is looking for trouble in the near term with its stock price. Regards, Rainier

To: majormember who wrote (5)	5/11/1998 8:30:00 PM
From: epicure	Respond to of 108

Great idea for a thread. Although there are no financial shenanigans involved I believe the NYT has a lot to answer for in the case of ENMD. Although the wind has been punched out of it, ENMD still has at least a 10 pt drop left in it, by Sept (my opinion, do your own DD). I didn't short it but bought November options. They have been great thus far. Zona is a scam, and another of my put picks. Still reasonably priced puts- I like the Novembers there too. Too bad they don't have leaps so i could hold till it goes to zero.