Thursday, June 02, 2005

From yesterday's class

When screening a stock, one shouldn't look at the EPS, instead they should look at PE. Because if the company repurchased some of its shares, then the EPS will go up as the number of outstanding shares decreased, but PE will remain the same.

Cash cycle - time between your payment to the supplier and receiving it from the customers.
Companies are looking to reduce the cash cycle, and most of the companies have successfully reduced it. But the opportunity cost in doing so is maintaining minimum current assets, either low cash, low inventory, etc., which results in lost sales.

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