Daniel Sermersheim

Will Some Solar Companies Face a Cash Crunch?

Well I'll just chime in to say that they call current assets current because they can be used in the next three months. If accounts receivable is large, its because they are selling product. Some companies always operate with a low cash level. Take CAT for example. One would not consider CAT a high risk proposition, especially in the long run. However, if we use the "Envoy theory of investing" we would never ever consider buying CAT. CAT's receivables stood at $9 billion at the end of last quarter, versus $777 million in cash. With $48 billion in total liabilities, the Envoy theory would say CAT should have went under already. But companies do not need much cash to function, they need current assets higher than current liabilities. What money do we have and is coming in during the next three months, versus what we have going out. Its not about what is in the bank at the moment.