catching falling knives, page-9

Heron 12,
Balance sheet is only part of the equation. I like to look at the cashflow statement. There are plenty of companies that have claimed high net assets per share but in fact company liquidators have received nowhere near these valuations. Remember book values are paper entries & may not reflect this value even in a fire sale, just the same as market values can be far higher than book values. Whilst I am not saying this about ELD, just remember to obtain book value for an asset, you must have a willing buyer. Only yesterday I heard of a farmer who purchased a very large tractor on Ebay for $14,000 which he reckons is at least worth $40,000 second hand in the right market, I would guess the original seller's book value of this tractor was far higher than both these amounts. Same asset yet 3 different values.
Companies don't fail because of high NTA but rather through their inability to met their debts. Many years (1990?)Rupert Murdoch in News Ltd was nearly brought down by a small amount of something like $11m (relative to other debts)fortunately Journalist Terry McCrann helped in stopping this one creditor from bringing down News Ltd. Not being able to pay one creditor can cause a pack of cards to tumble, then we see how good the book values really are.
Regards
Buffett
PS Also remember ELD is exposed to plenty of debtors who are capable of defaulting & starting a snowball effect.