RealMoney Radio Mailbag: Maximum Capacity

A listener learns what 'capacity constraints' mean for a company.
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Editor's note: The following are questions received from listeners of "RealMoney Radio." To send Cramer a question about topics from his radio show, click here. Listen to Cramer's latest radio show by clicking here.

What does a company mean when it says it has capacity constraints?-- Chris from Massachusetts

Jim Cramer

: When a company says it has capacity constraints, it basically means that production capacity is maxed out or there is a shortage of key inputs for products. This can limit sales volumes.

For example,

Caterpillar

(CAT) - Get Report

has capacity constraints for certain types of construction equipment. The company would be able to sell more, but it doesn't have the production capacity, and it can't source enough of certain parts, such as tires.

Jim, you have said that when a CEO or CFO leaves a company, it is sometimes a sign of trouble. How can we tell?-- Albert from Washington D.C.

Jim Cramer

: The key issue is timing. If a company announces that a key executive is leaving and gives a clear timeline for that person's departure, including the appointment of a successor, there is usually no trouble.

On the other hand, if a CEO or CFO leaves suddenly "for personal reasons" right before or after a bad quarter, you clearly have a red flag.

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