Revisiting the Balance Sheet Analysis

In the previous blog titled “So, We Ask”, it was mentioned that a good management team of a company on the right side of the business should be able to increase market value of its company by an amount equal to or more than the retained earnings. Another way to arrive at the same outcome is to look at the “net cash” position of a company. Roughly, net cash is obtained by subtracting the long-term debts from the sum of cash, cash equivalents and other marketable securities. Next thing to do is to divide net cash with the number of outstanding shares. This would give how much net cash is available per share. So, if you bought a stock at X dollar when the net cash was Y dollars per share, it would not be unreasonable to expect the share value to appreciate to an amount close to X+Y.