Clarence Wiseinvest slammed down the receiver. The phone was busy again. Once more he had been denied the opportunity to join the world's biggest ongoing conversation. With the Internet now passe and 1-900 dating lines falling from mainstream American consciousness, Clarence knew he was on the front end of the next big consumer trend. Hamsters. It was all about hamsters. The voice in his head kept saying, "Buy hamsters."

Specifically, it was a company called AMERICA TALKS HAMSTERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ATH)") else Response.Write("(NYSE: ATH)") end if %>. The dial-up phone service had completely displaced online access as the next big thing. Sex, drugs, and violence aside, it seemed clear that the one thing that everyone in America had in common was a deep abiding love of hamsters. Folks were spending hours chatting about how cute the little rodents looked chomping on hamster chips, or where the heck the furry little fellas thought they were gonna get if they kept running in that big spinning wheel. Clarence did not really care about hamsters, though. He cared about profits -- particularly because of ATH's management.

America Talks Hamsters' canny management team was made up of the best and brightest in the consumer universe. The chief executive was an ex-brand manager for salty-snack foods giant To-Tos, who was once in charge of determining the amount of orange residue that was to be left on a consumer's fingers after crunching down on the delicious cheese flavored chip. Recently, the company had added an ex-music industry guru principally responsible for creating the success of Menudo and New Kids on the Block, and guess who had been managing Donnie Wahlberg's blooming acting career until the chance to run ATH's HamsterChat division came along? This combination was a devastating one-two punch to other hamster chat imitators, like COMPUHAMSTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CHST)") else Response.Write("(Nasdaq: CHST)") end if %> or MICROSOFT'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> Hamster Network, both of which lacked the same kind of management depth or experience.

The voice rang out again. "Buy hamsters."

Clarence went for the phone, this time to call his broker. Out of the corner of his eye, he caught a flash of red, blue and yellow. And then he heard the jingle of bells.

"Clarence, put down that phone," Motley Fool commanded. "You are being rushed by The Whisper." Motley produced a large aerosol can of Whisper-B-Gon from his trench coat and sprayed the air next to Clarence's head. An almost invisible presence, instantly identifiable as the Whisper, could be discerned in the mist.

"Drat, Motley. You have found me again. How did you know?" The Whisper hung in the air, its compelling male voice dripping with venom.

"Simple, Whisper. No one should ever rush into an investment decision, particularly when there is some hard work to do." Motley gave the Whisper a stern, do-your-homework glare, causing him to melt away. "Anyone who looked at ATH's working capital situation would have wanted to do some more homework on the company instead of just plunging their savings straight into it."

"Working capital?" Clarence asked.

"Sure. Look at the balance sheet. Working capital is simply current assets minus current liabilities."

                                      (in thousands)
                                       December 31,
ASSETS:  1996

Current assets:
  Cash, cash equivalents
   & short-term investments               $130,189
  Accounts receivable                       75,887
  Prepaid expenses and
   other current assets                     91,195
Total current assets                      $297,271  

LIABILITIES & STOCKHOLDER'S EQUITY

Current liabilities:
   Trade accounts payable                 $133,860
   Other accrued expenses
    and liabilities                        264,537
   Deferred revenue                         89,606
   Current portion of long-term debt and
     capital lease obligations               2,249
Total current liabilities                 $490,252

Help show Clarence what Motley is talking about by figuring out the working capital for ATH.

1) $787,863,000

2) $192,981,000

3) -$787,863,000

4) -$192,981,000

The answer is 4.

"You see, Clarence, ATH has negative working capital," Motley said, pointing to the sharply negative number. "Although in and of itself it is not a reason for not investing, it is definitely a yellow flag that says you should do some further thinking before committing hard-earned dollars."

"What is working capital, Motley?" Clarence was genuinely interested.

"Working capital is the lifeblood of a company. It is the money they have free, sloshing around, ready to stick into the business." Motley paused and showed Clarence the equation. "You take the total current assets of $297,271 thousand and subtract from this the total current liabilities of $490,252 thousand. Because they are 'current', this means they will either be converted into cash shortly or need to be paid shortly."

"What working capital shows you, Clarence, is the balance of the money the company has at its disposal versus the money it needs to pay out within the near future. With negative working capital, ATH had better have a plan on how to build out that expensive telephone network. I would suggest looking at any reports on the company's last quarterly conference call to see what management is saying about this."

"Thanks a lot, Motley." Clarence was relieved. Maybe ATH was a good bet after all -- he just needed to do a little more work.

"Certainly, Clarence. Glad to help." Motley left through the front door.

"Hey, Motley ... why don't you fly away or something?"

"Errr... headache. Can't fly on days when I have a bit of a headache." Motley tipped his bell-hung chapeau and sauntered off to help another investor.

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