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    Discussion Question 1:
    A company here in San Diego was in the news about a year ago regarding its' success and the concerns that industry analyst's had with the company. The company is Websense. They make Web filtering software for corporations, stopping employee use of company computers to access unauthorized web-sites (think MP3 music, chat rooms, etc.) while at work. The company has bucked the dot.com trend and not only went out with an IPO just near the end of the tech-bubble, but has become profitable. That's what analysts like. They have money in the bank and no debt! And that's what the analysts don't like. One asked whether they were a bank or a technology company. Kind of counter intuitive: too much cash and too little debt. Do you agree that this is a problem? Can a company have too much cash and too little debt? Is the company missing an opportunity by being conservative (hoarding cash)? What would you do in this situation if you were the CFO of the company? And what would you tell the analysts?

    © BrainMass Inc. brainmass.com December 24, 2021, 4:58 pm ad1c9bdddf
    https://brainmass.com/business/cash/cash-debt-19429

    SOLUTION This solution is FREE courtesy of BrainMass!

    Yes, it really depends on the industry and what stage of development the company is in. In a start-up phase, it is normal for a company to have debt and low cash. The analysts are concerned that the company is not investing enough in its future business growth.

    Now like I mentioned above, it depends on the company's business model. If the company is in a high-margin, low-overhead, low-competitor situation, it can finance its growth with cash flow from revenues. If this is the case with this company, it does not need to pile on high debt and run the risk it will be like all the other failed dot-coms.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 4:58 pm ad1c9bdddf>
    https://brainmass.com/business/cash/cash-debt-19429

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