It's Not Good to be the Bank

No signals, no trades.

This is an interesting series done on a small manufacturing company that is facing severe financial issues. As an old business banker I find myself yearning (yearning? that's kinda weird) to see their financial statements. So many things at play here that affect so many people. I remember the stress of dealing with situations like this. You know there are employees, you feel the emotions of the owners, anger, sadness, denial.

I don't miss that.

The issue is debt. When Jen talks about growing too fast she hits it right on the head. Most small business owners don't get this. They think more sales and more growth are the keys to success. Sustainable growth is the key. Meaning that your equity has to grow with your increased sales. Debt can increase to help fund the growth but it cannot fund all the growth. If you keep pushing the debt levels before your retained earnings have time to grow you will eventually find yourself in the situation they are in now.

It's all about financial ratios, ratios that are very simple to calculate and understand if you take a little time to do it. They must be I did them. :)

Most small business owners won't, at least they won't until it's too late.

J.W. Hulme's problems have nothing to do with the current "credit crisis", these individual credit crisis happen all the time, and have been going on for decades.

I think the lack of financial literacy the world faces is the greatest mistake our educational systems have ever made.

When we all ate what we grew financial literacy was not much of an issue. As mankind became more "sophisticated" our understanding of finance has stayed in the agrarian age. Actually you could argue it has gotten worse since then. We have so many more ways to screw up financially.

Why is financial planning of some sort not taught as a core subject in high school? It is certainly more relevant than most of the current curriculum. Suze Orman and Oprah are trying, but if you know anything about the subject watching them try and teach very simple concepts to adults is like watching a 40 year old trying to learn how to read, or add 2 + 2.

It's painful.

It just shouldn't be this way.

Maybe Obama will fix it. He is going to cure all. Right?

Wait, he's going to borrow trillions without any thought of the consequences.

Have I mentioned debt is bad?