Editor's Note: The following are questions received from viewers of "Mad Money," seen every day at 6 p.m. EDT on CNBC.
What is the difference between long-term and short-term debt?-- Darren from Maine
James J. Cramer
: By definition, the principal amount of short-term debt is due within one year, while long-term debt is due at least one year out. In general, all debt levels should be compared against those of a company's peers.
The best way to measure how well a company can cover short-term debt is by using the current ratio, which is a company's current assets divided by its current liabilities. This ratio should be at least 2, and more than 4 for more conservative investors.
Long-term debt should rarely account for more than one-third of total assets.
: I like Honeywell the company, but am a bit more cautious about Honeywell the stock. That's because I recognize that the
is dead-set on slowing this economy down through a series of interest rate hikes, and I don't want to be long any cyclical stocks when this slowdown materializes.
: I would be a seller of JDS Uniphase because it is too speculative for me. And I believe Oracle's stock will be dead money until Larry Ellison, the company's famed CEO, leaves his post and the company can focus on operating improvements rather than acquisitions.
: Takeover offers are generally made in cash, stock or a combination of the two. In the case of MBNA, pending shareholder approval, BofA is offering investors $4.125 a share in cash plus 0.5009 BAC share.
At the time of the deal, the offer was worth $27.50 a share, but that figure will fluctuate along with Bank of America's stock price. That said, there is often a collar on stock deals like this; in this case, it would provide MBNA shareholders with downside protection should BAC's share price drop considerably.
I have about $60,000 in my portfolio, and try to own eight to nine stocks at one time. Is that too many names for this size portfolio?-- Bob from California
: No, I believe that you are well within your means by using this strategy. In general, I believe that folks should invest at least $1,000 or $2,000 in each stock in their portfolio in order to keep transaction costs relatively low. Otherwise, individuals will want to focus on mutual funds.
I recently bought Encore Acquisition (EAC) , which has since moved higher and just announced a 3-for-2 split. Should I sell before or after the split?-- Tim from Florida
: A stock split does not affect a company's fundamentals one bit, and should not be a factor in buying or selling decisions. If you owned 300 shares at $45 each before a 3-for-2 split, you'd hold 450 shares at $30 each afterward. Either way, your stock would be worth $13,500.
Jim always says on the show that we need to "do our homework." What are his favorite places to find information?-- Frank from Pittsburgh
: First off, I read a stack of a dozen daily newspapers each morning, everything from
The Wall Street Journal
The New York Times
. I also scour many Web sites, most notably
and its subscription products. Most important, however, I have hundreds of industry and market contacts with whom I'm in constant contact.
Interested in more Cramer? Check out Jim's rules and commandments for investing from his latest book by
. It's a series of articles from Cramer on how to become a better investor. The following table lists some of the rules that Cramer dissects.