Musings on Markets

FEBRUARY 15, 2023

Accounting Returns While profit margins tell a part of the profitability story, a high margin, by itself, may be insufficient to make a judgment on whether a business is a good one, i.e,, a business that consistently generates returns that exceed the cost of funding it.

Profit and Loss 52

Profit and Loss Investments Hurdle Rate Accounting 52

CFO News Room

NOVEMBER 8, 2022

” look at the Monte Carlo simulations, look at what is the hurdle rate. But we want it on the calendar so that we keep clients and ourselves accountable so that we make sure that those meetings actually do happen. But really the main driver in that first meeting is, “Hey, we’ve got to update the financial plan.

Restructuring 130

Restructuring Planning Marketing Accounting 130

Barry Ritholtz

MAY 9, 2023

And my dad had always said, as many young kids get this advice, doctor, lawyer, accountant, engineer. SALISBURY: And accountant seemed like a reasonable option. And I kind of stumbled my way into accounting. That background of being an accountant was just great bedrock training. RITHOLTZ: Sure. Very different fields.

Investments 119

Investments Banking Advertising Numbers 119

Musings on Markets

FEBRUARY 10, 2021

What is a hurdle rate for a business? In this post, I will start by looking at the role that hurdle rates play in running a business, with the consequences of setting them too high or too low, and then look at the fundamentals that should cause hurdle rates to vary across companies. What is a hurdle rate?

Hurdle Rate 52

Hurdle Rate Currencies Investments Valuation 52

Musings on Markets

JANUARY 12, 2021

I also offer online classes in basic finance (present value, risk models and measures) and accounting (or at least my version of it) as background to my main classes. Discount rates in intrinsic valaution have to change to reflect current market conditions, and can be expected to change over time.

Valuation 52

Valuation Corporate Finance Finance Investments 52

Musings on Markets

JANUARY 20, 2021

The failures of the signal have been variously attributed to low interest rates, accounting mis-measurement of earnings (especially at tech companies), and by some, to animal spirits. Data Update 4 for 2021: The Hurdle Rate Question. Data Update 2 for 2021: The Price of Risk!

Treasury 52

Treasury Investments Valuation Marketing 52

Barry Ritholtz

FEBRUARY 21, 2023

BUCKLEY: They were all institutional separate accounts. That means a low hurdle rate. And then, lastly, the possibility of putting private equity in retirement accounts, he would be furious, I would imagine. And we gave back $125 billion in assets, which most people think is crazy. RITHOLTZ: Billion with a B.

Leadership 111

Leadership Investments Profit and Loss Technology 111

Musings on Markets

JANUARY 31, 2024

In my last three posts, I looked at the macro (equity risk premiums, default spreads, risk free rates) and micro (company risk measures) that feed into the expected returns we demand on investments, and argued that these expected returns become hurdle rates for businesses, in the form of costs of equity and capital.

Hurdle Rate 80

Hurdle Rate Profit and Loss Accounting Investments 80

Musings on Markets

MARCH 8, 2023

The dividend principle, which is the focus of this post is built on a very simple principle, which is that if a company is unable to find investments that make returns that meet its hurdle rate thresholds, it should return cash back to the owners in that business.

Hurdle Rate 102

Hurdle Rate Corporate Finance Investments Finance 102

CFO News Room

JANUARY 7, 2023

Thus, market capitalization, interest rates and risk premiums, the data is as of that date. For accounting flow items , in income statements and statements of cash flows, such as revenues, earnings and expenses, I used the data in the most recent twelve months of reporting ; for most firms, that data is from October 2021 to September 2022.

Marketing 130

Marketing Valuation Corporate Finance Financial Analysis 130

Musings on Markets

JANUARY 6, 2023

Financing Flows Accounting Returns Dividends & Ownership Risk Premiums 1. Bond Default Spreads Growth Rates Accounting Clean up Tax Rates 1. Historical Growth Rate in Revenue/Earnings 1. Marginal tax rates, by country 2. Sustainable Growth Rate in Net Income & Operating Income 2.

Valuation 52

Valuation Corporate Finance Financial Analysis Leverage 52

Musings on Markets

JANUARY 9, 2021

While the universe of companies is diverse, with approximately half of all firms from emerging markets, it is more concentrated in market capitalization, with the US accounting for 40% of global market capitalization at the start of the year. If there is a hole in my sample, it is the absence of privately owned businesses.

Valuation 52

Valuation Currencies Numbers Corporate Finance 52

Musings on Markets

FEBRUARY 27, 2023

Furthermore, do they optimize they debt ratios to deliver the lowest hurdle rates. Book versus Market : The book debt ratio is built around using the accounting measure of equity, usually shareholder's equity, as the value of equity. Do companies optimize financing mix?

Corporate Finance 52

Corporate Finance Finance Marketing Banking 52

Barry Ritholtz

NOVEMBER 8, 2022

In a way, it’s more explicit in a capitalist economy because you’re paying a certain rate of interest on your loan, or you have a certain required hurdle rate on your investment, or you’re applying a certain discount in the valuation of an asset.

Valuation 59

Valuation Finance Investments Banking 59

Musings on Markets

JANUARY 5, 2024

I also have quirks in how I compute widely used statistics like accounting returns on capital or debt ratios, and I will stay with those quirks, no matter what the accounting rule writers say. will reflect the most recent quarterly accounting filing. Insider, CEO & Institutional holdings 2. Aggregate operating numbers 3.

Valuation 105

Valuation Financial Analysis Analyzing Data Profit and Loss 105

Musings on Markets

JANUARY 28, 2024

In particular, there are wide variations in how risk is measured, and once measured, across companies and countries, and those variations can lead to differences in expected returns and hurdle rates, central to both corporate finance and investing judgments. What's coming?

Hurdle Rate 117

Hurdle Rate Concentration Investments Finance 117

Musings on Markets

FEBRUARY 23, 2025

There are many who trust accountants to do this for them, using whatever is listed as debt on the balance sheet as debt, but that can be a mistake, since accounting has been guilty of mis-categorizing and missing key parts of debt. Data Update 4 for 2025: Interest Rates, Inflation and Central Banks!

Hurdle Rate 75

Hurdle Rate Marketing Investments IFRS 75

Musings on Markets

JULY 25, 2023

To estimate the equity risk premium, for most countries I start with default spreads, either based on the sovereign ratings assigned by the ratings agencies, or from the market, in the form of sovereign CDS spreads. in my July 2023 update) and apply this scalar to the default spread, to arrive at a country risk premium.

Currencies 52

Currencies Hurdle Rate Valuation Marketing 52

Barry Ritholtz

MAY 21, 2024

Unfortunately, nobody has the luxury of picking stocks for a 10 year period anymore, except for in, you know, our personal accounts. But now we’re back to a more normal hurdle rate. 5% interest rates is not super high. But I feel like there aren’t any value investors left out there. 00:50:03 Not anymore.

Finance 59

Finance Marketing Numbers Investments 59

Barry Ritholtz

NOVEMBER 25, 2024

So you’ve got, you’ve got a modeling hurdle rate that you need to figure out when you’re adding diversifiers. That is their savings account, particularly when cash is returning nothing. They’ve already given the account away to somebody else. And it took three months to get the account back.

Leverage 59

Leverage Investments Marketing Math 59

Barry Ritholtz

DECEMBER 26, 2023

Accounting was very difficult. It’s about a 50% fail rate, something like that. So it’s gonna take a little more confidence, you know, and equities to, because you get your, your hurdle rates higher, you know? And I remember that first level was tough. I had no finance background. Maybe even more.

Marketing 64

Marketing Leadership Finance Investments 64