Huge and Still Growing Dinar Regrets Points and Pills Pepsico's Balance
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Ask the Fool Points and Pills Can you explain what Q“points” are, financially speaking? — T.P., Biloxi, Mississippi There are several kinds Fool’s School operations. Between fiscal 2019 and My Dumbest Investment The Motley Fool Take Aof points: 2020, PepsiCo’s debt jumped from • In the mortgage world, points $32 billion to $44 billion. A peek at Dinar Regrets Huge and Still are fees you can choose to pay to PepsiCo’s the notes in PepsiCo’s annual report your lender for a lower interest Balance Sheet reveals most of its debt at interest My dumbest investment was Growing rate. A point is 1% of your loan rates below 3.5%. buying foreign currency — If you want to improve your specifically the Iraqi dinar. I know Microsoft (Nasdaq: MSFT) — amount — so, for a $200,000 Next up on the balance sheet: investing, you should learn how to … stupid. But I also blew $300 on with a market value recently near $2 mortgage, a point is $2,000. inventory. PepsiCo’s rose 25%. Ris- navigate your way around financial an extravagant dinner once; I would trillion — is, arguably, one of the • A “basis point,” meanwhile, ing inventories can reflect unused safest stocks on the market. It has statements such as balance sheets. have hated to miss out. In the end, is one one-hundredth of a per- production materials and unsold just about every attractive trait a sin- Some financial statements, such as I’m not out much besides my pride. centage point, or 0.01%. People products languishing on shelves Ide- — R.G., online gle stock can possess. Its business is an income statement, reflect a com- sometimes refer to basis points ally, inventory growth shouldn’t out- diversified: in this case, across oper- pany’s performance over a period of The Fool Responds: We all when talking about interest rates pace sales (or revenue) growth. ating systems (Windows), software time, such as a quarter or year. But make financial blunders. With any or bond yields. Calculating inventory turnover (Office 365), cloud infrastructure a balance sheet reflects its financial luck, they won’t be major, and we (Azure), social media (LinkedIn) and • Stock market indexes are can be informative, too, as it reflects can learn from them and move on condition at a specific moment — video gaming (Xbox). Every one of often measured in points rather how many times per year the com- without kicking ourselves too much. typically the end of a quarter. these lines is a growth business, and than dollars, even though they’re pany sells out its inventory. Take Spending money on great experi- Here’s a look at PepsiCo’s bal- most generate recurring subscrip- based on stocks that trade in dol- 2020’s cost of goods sold (from the ences, such as an amazing meal or a ance sheet, reflecting the end of its tion revenue. Moreover, each of lars. For example, the Dow Jones income statement) of $31.8 billion trip to another country, is generally these businesses is highly profitable last fiscal year in December 2020. worth it, as long as you can afford Industrial Average or the S&P and divide it by the average of 2019 and requires relatively little capital There’s $8.3 billion in cash and cash it. Investing in foreign currency can 500 might go up (or down) hun- and 2020 inventory ($3.8 billion) to investment to grow. equivalents, up from $5.6 billion be tricky, though, and it’s best to dreds of points in a day. arrive at turnover of 8.4. The higher In the quarter ending Dec. 31, 2020, the previous year. A growing pile of the number the better, and increas- read deeply on it first and to really Microsoft’s revenue accelerated by *** cash is good, but at some point, if a know what you’re doing. 17% year over year, while operat- ing turnover rates are promising. For more than a decade, many I read that Netflix once used company has more than it can put to (PepsiCo’s turnover rate was 9.4 a ing income grew by an even more Americans, including lots of impressive 29%. It also has a terrific Qa “poison pill” strategy — good use, it might pay out more in year earlier.) military personnel, have been per- what’s that? — P.B., Greensburg, dividends to shareholders. Balance sheets and other finan- balance sheet, with $132 billion in suaded to invest in Iraqi dinars. It cash against just $60.5 billion in debt. Pennsylvania It’s generally best for companies cial statements are generally has repeatedly been referred to as a to have little or no debt, but taking That leaves plenty of cushion against In 2012, corporate raider available on a company’s website scam. The proposition is not unlike a big downturn in the market — and ACarl Icahn alarmed Netflix on manageable debt — especially in the “Investors” section. They’re that for penny stocks — they’re so if one arrives, Microsoft could buy up when he bought almost 10% when interest rates are very low — included in quarterly earnings and cheap that you can buy a lot with its own stock at a discount, or make can be an effective way to finance annual reports. relatively few dollars, and they’re opportunistic acquisitions. of the company’s stock — so cheap that they’re likely to suggesting that he might have Then there’s the dividend: Micro- increase in value. Unfortunately, soft’s stock recently yielded less been preparing to push for a many investors in the currency leadership change or even a Name That Company than 1%, but that payout has been have been burned — because Iraq increased by an annual average of 9% hostile takeover. So Netflix did remains a war-torn nation without a I trace my roots back to over the past five years, and is likely what many companies have thriving economy. to keep rising over time. (Teresa done to avoid being taken over 1932, when McGee Airways Currency investments can be Kersten, an employee of Microsoft — it instituted a “shareholder and Star Air Service began fly- quite speculative. It’s safer to stick subsidiary LinkedIn, is a member of rights plan,” otherwise known as with more reliable investments, The Motley Fool’s board of directors. ing in Anchorage. By the late such as those in solid dividend- a poison pill. One variety, when 1940s, I was one of the world’s The Motley Fool owns shares of and paying stocks, or in bonds issued has recommended Microsoft.) triggered, permits the company by trustworthy entities. to sell shareholders newly issued largest charter operators, hav- ing bought some former mili- shares, in order to dilute the LAST WEEK’S TRIVIA ANSWER potential acquirer’s stake. tary aircraft. I delivered food in Poison pill plans are typically I trace my roots back to San Francisco in 2007, a time when the Berlin Airlift, and transported hotel rooms were scarce due to a big conference. Two of my triggered whenever some party’s Yemenite Jews to Israel in 1949. co-founders lived there and were broke, so they rented out air ownership stake in a company Today, with a market value recently mattresses in their apartment to three conference attendees. crosses a certain threshold. Today I’m a major force in the hospitality arena, with 4 million These plans can successfully topping $8.5 billion, I’m an international people having hosted more than 800 million guests around the fend off takeovers. But they have operator; I take more than 44 million world. I went public via an IPO in late 2020 and was recently risks of their own: Sometimes a customers to more than 115 destinations valued at nearly $109 billion — more than Marriott International, takeover isn’t a bad thing, and in four countries annually. I was the first Hilton Worldwide, Hyatt Hotels and InterContinental Hotels diluting shares can hurt existing North American airline to sell tickets online. Group combined. Who am I? (Answer: Airbnb) shareholders. I bought Virgin America in 2016. Who am I? Want to Invest? Email us at [email protected], and we’ll Want more information about stocks? send you some tips to start investing. Sorry, we can’t provide Send us an email to [email protected]. Think you know the answer? We’ll announce it in next week’s edition. individual financial advice. © 2021 THE MOTLEY FOOL/DIST. BY ANDREWS MCMEEL SYNDICatION 4/29.