How to Think Like Benjamin Graham and Invest Like Warren Buffett

142 ShowMetheMoney woul dgive us a value per GE share of $100 (5.00/.05). If you go further an d deem a lower cap rate of, say, ...

YouMaketheCall 143 Believers in the modern finance stories discussed earlier, for exam- ple, multiply the market risk premium by ...

144 ShowMetheMoney Graham sai dthe margin of safety principle ultimately serve das the touchstone in distinguishing between inve ...

YouMaketheCall 145 tical to the capitalization of earnings technique. An assume d divi- den dpayment is divi de dby an assume d ...

146 ShowMetheMoney MARKET CIRCULARITY The greatest deficiency in using market metrics for valuation is the problem of circularit ...

YouMaketheCall 147 Neither of these groups is correct, for it is logically impossible to say that any person is correct about th ...

148 ShowMetheMoney mean more earnings. A company cannot grow faster than its sales, but it can grow more slowly with poor manage ...

YouMaketheCall 149 look, industry, relative maturation (rookie, vintage, or classic), and accounting policies use din calculatin ...

150 ShowMetheMoney ulation of revenue recognition timing, restructuring charges, and others discussed in the next chapter. These ...

YouMaketheCall 151 of increasing the earnings usually sell at high price-earnings ra- tio (over 15 times the current earnings).. ...

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153 Chapter10. Making (Up) Numbers A ccounting shenanigans have plague dbookkeeping since it was invente dby Luca Pacioli in 149 ...

154 ShowMetheMoney counting issues that are hallmarks of earnings management. These techniques are as ol das accounting itself a ...

Making(Up)Numbers 155 (R&D) costs. Accounting rules require such R&D costs to be ex- pense dwhen incurre d(rather than a ...

156 ShowMetheMoney tion. He also instructe dthe SEC staff to focus on materiality not solely in quantitative terms but also in q ...

Making(Up)Numbers 157 America for its abuses of financial reporting, as have many since, most notably City University of New Yor ...

158 ShowMetheMoney gram in a resolution unanimously approve dat its boar dmeeting this week: The Board of Directors and its Inde ...

Making(Up)Numbers 159 an d disclose that these resulte dfrom a problem with the “collectibil- ity” of our accounts receivable. a ...

160 ShowMetheMoney recording the amount of cash we “burn” as an asset Companies with negative cash flows sometimes get credit fo ...

Making(Up)Numbers 161 to matter very much to the managers at our company or to other owners of options on our stock. To reconcil ...