if you could only have four ratios to evaluate a company what would they be? This is a fun question that is popular in investing circles. For a laugh I’ll take my shot at it, what would you pick?
1) Current Ratio
Current Assets / Current Liabilities
Why?
This ratio keeps track of the company’s ability to pay its short term debt. If a company doesn’t have safety money to deal with debt then they might not be in business tomorrow and I don’t need any of that.
2) Dividend Yield
Annual Dividend Per Share / Price Per Share
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 A recent mass layoff at my company has given me a fresh perspective on layoffs. Normally, as an investor, we see layoffs as a courageous way to drive profits forward by shaking off some areas of weakness. I have personally invested in companies shortly after a mass layoff if I believe that such changes will benefit the profitability of the business. From a purely financial perspective viewing a company as a machine is an easy thing to catch one’s self doing. However there are some soft costs involved in layoffs to a company culture that I wasn’t really aware of until the week after I witnessed fellow employees walking out the door for the last time:
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 I am willing to concede that company insiders know more about their businesses than I could ever learn about it by reading financial statements. This is why I use insider trading as part of my assessment critieria. The fact that all company insiders are not created equal should come as no surprise- who would you trust to know more about a business, the chief accountant or the janitor?
So what are the best job titles when it comes to insider trading? To give my analysis on this let me first set a few ground rules:
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 To understand a balance sheet requires that we understand every line item, what each means, and how it can be manipulated. Today we are going to look at the line item for Goodwill.
Goodwill Definition
Goodwill is one of the most commonly misunderstood line items in the balance sheet, I once met a junior investor who thought that Goodwill was the amount of money that the company had donated to charitable organizations. This unfortunately is not the case, goodwill, simply put, is the byproduct of two companies merging.
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 Today Bernie Madoff was sentenced to 125 years in prison. To send him off here are a few tips for Madoff on going to prison, bullet points are borrowed from a prison blog Top 10 prison survival
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- Keep your mouth shut
Shouldn’t be a problem Madoff ran his scam for years before he was eventually caught. In fact the folklore around Madoff was that if an investor cornered him at a public function and pushed him to talk about their investment that he would pickup the phone and have their investment canceled.
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 Ask anyone who works at a large corporation and they know that if you want to learn the dirt about what is going on in the office you just need to talk to the secretary. Secretaries know everything about what is happening in the company, they may not have the acumen to diagnose the severity of problems but they certainly have the acumen to understand how upset their bosses are that week.
Secretaries are a great resource in understanding the health of the company. This may sound a bit foolish but I will often give an executive secretary a quick call before making any sizable investment in a company.
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