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Show The Salt Lake Tribune BUSINESS Sunday, January 31, 1999 ~ What Is This Thing Called The Motley Fool? The Motley Fool Stock Splits Where can I find out about a company’s recentstock splits? I'd also like to see a chart Remember Shakespeare? Remember “As You Like It“? In Elizabethan days, Fools were the onlypeople who could get away withtelling the truth to the that shows me howthe stock per~formed after its splits. — J.D., “Elkhart,Ind. = A good sourceis the horse’s =£-\ My Dumbest Investment mouth.Call the company’s ~ investorrelations department and ask. If you're online, head to http://quote.fool.com.In the data section, type in a company’s ticker symbol and choose “charts.” Whenspecifying what kind of chart you wanttosee, select “showsplits.” For lists of past and upcomingsplits, visit www.street-watch.com. Just make sure you're not giv- ing stock splits undue importance. Suddenly owning more shares can be fun, but it’s not too meaningful. Pre-split, you might have owned100shares pricedat $60per share(total value: $6,000). Post-split, your 200 shares are worth about $30each, for a total of $6,000, Not much has changed. Paid for No Advice Starbucks’ Balance Sheet growth.) It’s also good to measure inventory turnover, which reflects how many times per year the firm sells outits inventory. We take 1998's see whetherits financial health is growth should outpace inventory investors can evaluate a com- By studying a balance sheet, sionsas they can. It’s often helpful toget a second opinion before trans- Glancingatits balance sheet, we see $101.7 million in cash acting. You might want to drop by our message boardsonline at andcash equivalents, up http://boards.fool.comand see what our community thinks before placing Do you havean embarrassing lesson learned the hard way? Boil it down to ofcash 100 words (or less) andsendit 10 The Motley Fool c/o My Dumb. | was founded by an Armenian immigrantin Detroit in 1929. He single-handedly turned onthe ¢ faucet of my earnings, and today nearly $400 million flows to my bottomline eachyear, from in Silicon Valley. Its partners pooltheir money andinvest in fledgling companies,specializing in computer-related technology andlife sciences firms. Venture capitalists typically scene well before a companygets to the IPO stage. roughly $3.7 billion in rev- They pony up a lot of money to enues. My nameinitially included “Screw Products,” and | served the auto industry. | was the best-performingstock of the 1960s, advancing 10,000 percent. During the 1980s, | was the country’s largest furniture maker, but| sold off most of that business. Cabi- help the firm grow,usually in exchangefor a large percentage of the company. Theyoffer guidance, as well. The expectation is thal once the company grows to a certain point, it will go public andthe venture capitalists can profit. sales today, and| sell manyitemsfor bathrooms. My brands include KraftMaid and Delta. Who am |? Kleiner Perkins has funded many companies, such as Amazon.com and Netscape, in their infancy. is ‘ ‘concern, but Starbucks has beenexpandingits range of that the firm is financing opera- meaningthere’s enough cash (and tionseffectively. Next up,inventory. Valued at $120million in 1997, it ended 1998 at $143 million, up about 19 percent. Rising inventories assets readily convertible to cash) on handto coverbills. Cool can indicate unsold products languishing onshelves, but since salesros percent year-over- year, the rise in inventory appears s. Manyinvestors focus only on sales and earningsgrowth. While that’s important,long-term balance sheettosee howsturdy the underlying business is, mail c/othis newspaper, attn: The Motley Fool. Sorry, we prize! he Fool Tak Reinvesting Cash Flow Investing in personal computer companiescan be tough.Their gross marginsare even lower than those of supermarkets, so the percentageofsales they can invest in operationsis small. But this doesn’t mean that PC companies are going togive you low, supermarketlike retums if you investin them. You have to look beyond gross margins to the reinvestments requiredto keep these businesses growing. o, and you mightdiscover In its first nine months offiscal 1998, the company gen- erated net cash flow from operations of $494.7 million, significantly morethan its net income of$217.3 million. With some companies, this would simply reflect a lot of noncash expenses such as depreciation. For Gateway,that explains only $76 milflow comes from improvements the companyis makingin its Dumbest(or Smartest) Investments (up to 100 words), and yourTrivia entries to Fool@fool.comorvia regular can't provide individualfinancial advice. errr errr errr eerie rer reer rr wayto the bank. lion ofthe difference, though. The other $200 million in cash investors should also study the Write to Us! Send questions for Ask the Fool, Know the answer? Sendit to us with FoolishTrivia on the topand you'll be enteredinto a drawing fora nifty Gota question for the Fool? Sendit in seeWrite to Us Normally, this might be a LAST WEEK’S TRIVIA ANSWER Investors’ pulses might be quickening as they note how my revenues have been turbocharged, advancing more than 1,600 percentin the 1990s. (Mystockprice hasoffered even more excitement, surging from the teens in 1993 to near $90 in 1995, then back down to the low $20sin 1997 before returning to the : $60s recently.) My products have to do with money, and try to makethings like banki less taxing. Myflagship product was introduced in 1984,ai its first big order came from retailer Egghead in 1986. The governmentdissuaded Microsoft from buying mein 1995. Who am |? (Answer: Intuit Inc.) nets make up abouta third of my cash out, makinga very tidy less rosy. They rose 63 per- cent, outpacing sales growth. You usually wantto see little or % activities. New nonretail lines of no debt. Between 1997 and 1998, business have beenadded, alterStarbucks’ long-term debt has ingits usualreceivables pattern. plummeted from $169million to Finally, let's look at the “quick $1.8 million. That's good. If debt ratio,” which subtracts inventory were significant, we might peek from currentassets and then at the footnotestosee the interest divides by current liabilities. Starrates. Low rates wouldindicate bucks’ result, 1.08, is above 1.0, Name That Company ture capital firms, based higherthe better, so no worries A here. Accountsreceivable are promising.z eS est Investment: Got one that worked? Submit (o My Smartest Investment, If weprint yours, you'll win a Fool's cap! ryville, N.C. It's one of the top ven- givesus a tumoverof4.4, up a smidgefrom last year’s 4.3. The 45 percent from the previousyear. A growing pile your order. C.H., Cher- of 1997 and 1998inventory ($120 million and $143 million averaged is $131.5 million). This recently reported results forits ona year that ended on Sept. 27, generating as many commis- . lion and divideit by the average improving orfailing. Let's examinethe increasingly ubiquitous coffee purveyor, Starbucks.It another commission. Through all this, he offered me no advice, even but many charge you a lot for bad advice, cost of goodssold (from the income statement) of $578 mil- pany’s currentcondition and also meinvest more wisely er, Foolishly. C.B., Indianapolis The Fool Responds:Thereare definitely some good brokers out there, Caulfield & Byers. Does it underwrite initial public offer- enter the well under control. (Ideally, sales loss, when the stock went down a little, I panicked and askedthe broker to sell. He did — charging me though he was aware I was new at investing. It cost me quite a bit of money,but I've learned to choose brokers who do offer advice and help tells the truth aboutinvesting, andhopes you'll laugh all the The Fool School A few years ago, I bought stockin the company where I worked through mythen broker, failing torealize that I could have purchasedit with no commission through our employeeretirementplan. Then, to compound my Tell me about this firm I've Qh of, Kleiner Perkins ings (IPOs)? — King or Queen. The Motley Fool Our Mission: To Inform, to Amuse, and to Help You Make Money cece ©Copyright 1999 The Motley ‘ool/Dist. by Universal Press Syndicate business model. These include showcasing its products in new Gateway Country Stores as well asits new YourWare financing program Most companies have to plow moneyinto inventory and receivables in order to grow annually rates higher than 15 percent. Thanks toits highly improvedoperations and strategic moves, Gateway cash flows can offset its tively light capital investment needs. 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