Episode Details

We continued our discussion of earnings and cash flows, starting with an examination of how best to update earnings and correct them for the mistreatment of some financial expenses as operating expenses (leases were the biggest, but accounting has come to its senses) and some capital expenses as operating expenses (R&D is a prime example) We then dealt with some final issues on earnings, including the tax rate to use in computing after-tax cash flows and dealing with money losing companies. In the process, we did look at what to do about accounting fraud, and while the answer is not much, there may be a role for forensic accounting. To be honest, most forensic accounting books are designed for valuation morticians, but here are a couple that you may find useful:
http://www.amazon.com/Financial-Shenanigans-Accounting-Gimmicks-Reports/dp/0071703071/ref=pd_sim_b_8
http://www.amazon.com/Creative-Cash-Flow-Reporting-Sustainable/dp/0471469181/ref=pd_sim_b_2
We then moved on to examine broad questions about what to include in capital expenditures and working capital.

Start of the class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/cftests2.pdf
Slides: https://pages.stern.nyu.edu/~adamodar/podcasts/valspr24/session8slides.pdf
Post class test:
https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session8Atest.pdf
Post class test solution: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session8Asoln.pdf

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