LEH has been pegged as one of the worst Investment Banks for exposure to CDO’s and other woe’s currently.
Therefore a quick and dirty analysis of LEH.
Line Entry………………………2007………………………..2004
Receivables……………………..+54%, +29%, +15%, +22%
L.T debt…………………………+51%, +50%, -4.5%, +30%
Accts Payable………………..+46%, +29%, -13%, +28%
Accrued Expenses…………..+9%, +34%, +3.3%, +14%
Operating Income…………+1.8%, +22%, +37%, +38%
Current ratio…………..0.54
Collections ratio ……..0.74
Thus Lehman is on very shaky ground. Operating Income growth anaemic, while the Current liabilities exceed Current assets by almost 2:1 necessitating further borrowing. This business is already leveraged higher than is prudent, and with the poor collections on Receivables, further cashflow problems are likely.
That the banks [and brokers etc] are rallying currently, on bailout news, or other, certainly makes the market seem a tad irrational.
