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Gold/Mining/Energy : Harken Energy Corporation (HEC) -- Ignore unavailable to you. Want to Upgrade?

To: SDR-SI who wrote (3425)	8/16/1998 11:27:00 PM
From: Razorbak	Read Replies (1) \| Respond to of 5504

Effective Working Capital Steve: <<The $178MM working capital figure comes from their quarterly report published last week. Do you have documented reason to believe the figures they reported to the SEC are false?? If so, please clue us in.>> Technically, your definition of working capital is correct (i.e., current assets minus current liabilities), but it is perilous to conduct financial analysis by looking at the balance sheet alone. I do not doubt the published figures in the latest 10-Q, but they only give a snapshot in time which happens to be accurate at the end of the last quarter. What the balance sheet doesn't tell you is why the company went to the capital markets in the first place. The only way to answer that question is to look at the cash flow statement in conjunction with the company's overall investment plans. The answer is pretty obvious. There isn't enough cash flow available from operating activities or investing activities to fund the company's investment spending program, hence management must generate incoming cash flow from financing activities to maintain a positive cash position. In other words, internally generated cash flow or "effective working capital" is too low. (Pardon my liguistical license, but if the good Doctor can dream up new words, I figure I get a couple of token shots, too. <vbg>) Believe me, I don't have a problem with using the capital markets for financing if the terms are reasonable. But IMHO the terms weren't reasonable. Harken chose the floorless route. However, since the "floorless" subject is now off limits according to the thread police, I will stop my little diatribe and leave it at that. <g> Best of luck on your investment. Razor