Thread by @RajenJangam

Some Thoughts while reading Financial Statements
1.Goodwill – if a company has a goodwill then that company grown thru acquisitions .

2. What is goodwill👉accounting book value dressed up…👉 4 billion actual book value but paid 6 billion (2 billion goodwill)—>?—>X Unknown variable…

3.Accounting is Backward looking —-> history writing in excel sheets — > share holders equity —> ultimate backward looking—–>all retained earnings over time + the companies initial public offer —->

4.Accounting and Fair value is a oxymoron —-> u cant do accounting and fair value at the same time🤔

5.Be true to first principles —-> every thing else is details—>

6.Returns —> should be based on cash flows—-> no garnishing allowed in investing—> don’t grind thru numbers —-> no buzz words..

7.Debt —–> should be matched to your assets —–> if you are a Toll road company —-> the right kind of debt is long term debt ...

8. If your maximum cash flows comes from USD —-> then your max debt should be in USD—-> never mismatch debt and assets —> should be compatible ...

9. If you cant find a project which it cant make even the hurdle rate —> then don’t take the project —–> return the money to the owners..but how? Not by share Buy back...😜

10. Always remember Revenues or not profits .... you cant buy a pizza from Earnings....Dont forget always Cash Flows Matter...😊

11. Make sure that the Company CEO must always try to Maximize the value of the business not try to maximize the value of the share..

12. To be socially responsible you must be financially healthy it applies to a person or a firm...

13.Board directors will not behave like Equity investors ——> they will behave like Directors —–>????——-> they don’t own shares of that company (may be some options)—–> u got it …... No skin in the game...😜

14.If the Board is Too Big nothing going to happen —-> productively—>??

15.Never believe any thing until it is officially denied 😜✨

16.Almost all M&A are value destruction’s not value creators...😕

17.👉CEO’s can increase the share price by ripping off the bond holders...

18.👉Managers will not tell the truth—–>but some times if they want to.. they know when to tell the truth—->bundle the truth—->delaying and packaging information —–>😜

19.👉Maximizing Revenue —-> Not profits all revenues are not profits—->?

20.👉Maximizing Market share—–> by how?.. is it by reducing selling price ??

21.👉Maximizing Market share—–> by lowering value of the firm —>???

22.Hurdle Rate = Risk less(free) Rate + Risk Premium

👉Risk = Danger + opportunity

23.👉There is no Risk in the past😊

Risk is how Future is Different from past

24.👉Beta does not measure Risk

👉Beta does not measure Volatility

👉Beta measures Risk in a Diversified Portfolio —->Risk with respect to Market—–>

👉Only 8% will be explained by CAPM(Capital Asset Pricing Model) model 😜—————————–>92%—->???

25.Assumptions in CAPM Model
1.Every single model in finance assumes that variance measures risk—-> is it true???—–>who cares😜