Capital Decision Making a Decision as a

Capital Decision Making a decision as a venture capitalist, whether as a director/adviser for a venture capital firm or as an individual investor looking for a substantial investment opportunity, requires a great deal of consideration on various levels. Before a decision to invest is made, a careful consideration of the quantitative and qualitative aspects of a company must be undertaken, and the potential payoff of any investment must be weighed against the risks identified both within the company and in its operating environment.

The following paragraphs will present a brief analysis of two publicly traded companies that are well-established, yet are also potentially large investment opportunities for an entity with an appropriate amount of capital. The risks and current states of these companies will be assessed along with other details and information in order to determine which company represents the best investment. pSividia pSividia Corp., founded in 1987, specializes in developing and producing drug-delivery devices and technologies for use in a variety of situations and to treat a number of specific conditions (Yahoo Finance 2011).

The company currently has no debt and a current ratio above 16, making it highly solvent, yet at the same time this lack of debt means the company is already substantially tied up in equity shares and thus profits per share are minimal (Yahoo Finance 2011). Revenues have also taken a major plummet in the past year, and there is a significant difference between the current and projected price-to-earnings ratios (Yahoo Finance 2011).

In addition to the internal financial and capital structure issues that can be noted in the company from a brief overview of its key statistics and figures, there are some environmental risks that the company is facing.

Though the company has designed and produced a variety of products, each individual product requires a great deal of money and time in the development and testing phases due in part to the regulatory environment, and has limited usefulness and marketability once approved for sale due to the specificity of most of their products (Yahoo Finance 2011).

The unique and rare nature of the products made by the company, of course, enable a premium to be charged for them, but a minor glitch in the development of a single product or the entrance of any pharmaceutical, technology, or medical breakthrough that renders any product obsolete can be disastrous for the company's revenue stream and ultimate profitability. It is not clear that the payoff is commensurate with the risk. Sharps Compliance Corp.

As a collector and handler of a wide variety of different medical waste products, Sharps Compliance Corp has come far in its two decades of existence (Yahoo Finance 2011). The company has no debt and a current ratio over six, making it a very cash-rich company, and annual revenue is fairly substantial (Yahoo Finance 2011). At the same time, the company is operating at a loss with costs exceeding revenues by a margin approaching twenty percent, and return on equity currently situated below negative twelve percent (Yahoo Finance 2011).

Despite what seems to be extensive and broad market penetration, the company is having difficulty turning a profit. This could in part be due to the fact that the day-to-day operations of the company and its many divisions and subsidiaries is highly capital-intensive, with transportation, personnel, and storage or disposal costs mounting for every client and unit the company contracts to handle (Yahoo Finance 2011).

Though economies of scale certainly apply here, the per-unit increases for the company are still somewhat significant, and in order for the company to truly create value and return to profitability it must both reign in these costs and increase its market penetration in order to more effectively and efficiently capitalize on its contracts (Yahoo Finance 2011). The inherent risk here, of course, is that.