Remove Accounting Remove Hurdle Rate Remove Profit and Loss
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Data Update 5 for 2023: The Earnings Test

Musings on Markets

During the course of the year, investors also rediscovered that the essence of business is not growing revenues or adding users, but making profits from that growth. In this post, I will focus on trend lines in profitability at companies in 2022, with the intent of addressing multiple questions.

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The Corporate Life Cycle: Corporate Finance, Valuation and Investing Implications!

Musings on Markets

Setting the Stage The notion of a business life cycle is neither new nor original, since versions of it have floated around in management circles for decades, but its applications in finance have been spotty, with some attempts to tie where a company is in the life cycle to its corporate governance and others to accounting ratios.

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Data Update 5 for 2024: Profitability - The End Game for Business?

Musings on Markets

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.

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Transcript: Tim Buckley, Vanguard’s CEO

Barry Ritholtz

BUCKLEY: They were all institutional separate accounts. And you know, just simple things like, hey, the value of tax loss harvesting, how do you make that apparent to people? BUCKLEY: Well, the way we’re built, being client owned, it’s the way we return profits to our clients. That means a low hurdle rate.

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Data Update 4 for 2021: The Hurdle Rate Question!

Musings on Markets

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?

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Data Update 7 for 2023: Dividends, Buybacks and Cash Flows

Musings on Markets

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.

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Data Update 1 for 2021: A (Data) Look Back at a Most Forgettable Year (2020)!

Musings on Markets

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.