16-2 Convertible Debt 2

16-2 Convertible Debt 2 - Finding Balance Sheet Beauties...

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Finding Balance Sheet Beauties – Post-Enron, the less debt the better Source: Fortune Magazine, 29 April 2002 You can't say the Enron debacle was all bad. That scandal will forever change the way accountants, Wall Street researchers, corporate financial officers, and credit-rating agencies operate. (We hope.) As a result, our markets will be stronger, more account- able, and more transparent. (We hope.) And more immediately, it provides us with a solid investment thesis: Stocks of companies that improve their bal- ance sheets should outperform those that remain mired in debt. The health of a company's balance sheet has a direct impact on the success or failure of its business. The balance sheet affects the willingness of vendors to transact with a company and the price it pays for supplies. It also affects how much a company can invest in research and development, and its ability to make strategic, synergistic acquisitions. Ultimately, those factors are what determine a company's com- petitiveness. And especially now, in these jumpy post-Enron days, if your balance sheet is lousy with debt, no one--not investors, not creditors, not cus- tomers--wants to get near you. Companies looking to spiff up their balance sheets
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This note was uploaded on 05/03/2010 for the course ACCT 202 taught by Professor Yang during the Spring '10 term at UPenn.

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16-2 Convertible Debt 2 - Finding Balance Sheet Beauties...

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