CDnow stated in a press release that it has enough cash to last through September of this year. But Market Guide's estimates found that CDnow had enough cash to last until July of next year. CDnow was one of the companies that didn't return calls for comment. Investors are betting on Internet companies because they are supposed to be growing rapidly. The higher the revenue growth, the better.
Gross margin is how much a company keeps from revenue before paying overhead.
This shows the fundamental profitability of the business. Hand says investors should look for expanding gross margins to show that a business model is getting traction. As with revenue growth, the higher the number, the better. Investors should wait a quarter, though, before passing judgment here, Hand says. Without improving and healthy gross margins, there's little chance at profitability.