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In corporatefinance and investing, which are areas that I work in, I find myself doing double takes as I listen to politicians, market experts and economists making statements about company and market behavior that are fairy tales, and data is often my weapon for discerning the truth. Insider, CEO & Institutional holdings 2.
I am in the third week of the corporatefinance class that I teach at NYU Stern, and my students have been lulled into a false sense of complacency about what's coming, since I have not used a single metric or number in my class yet.
The Dysfunctional Version In practice, though, there is no other aspect of corporatefinance that is more dysfunctional than the cash return or dividend decision, partly because the latter (dividends) has acquired characteristics that get in the way of adopting a rational policy. Data Update 5 for 2025: It's a small world, after all!
In fact, the business life cycle has become an integral part of the corporatefinance, valuation and investing classes that I teach, and in many of the posts that I have written on this blog. In 2022, I decided that I had hit critical mass, in terms of corporate life cycle content, and that the material could be organized as a book.
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 hurdlerates for businesses, in the form of costs of equity and capital.
The question of whether a company is making or losing money should be a simple one to answer, especially in an age where accounting statements are governed by a myriad of rules, and a legion of number-crunchers follow these rules to report profits generated by a firm.
Check rules of thumb : Investing and corporatefinance are full of rules of thumb, many of long standing. Thus, market capitalization, interest rates and risk premiums, the data is as of that date. Or, do US companies pay far less in taxes than companies incorporated in the rest of the world?
Measuring Profitability The question of whether a company is making or losing money should be a simple one to answer, especially in an age where accounting statements are governed by a myriad of rules, and a legion of number-crunchers follow these rules to report profits generated by a firm.
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. Tax rates 4. Financing Flows 5. will reflect the most recent quarterly accounting filing. Aggregate operating numbers 3.
CorporateFinance : Corporatefinance is the development of the first financial principles that govern how to run a business. It is that mission that makes corporatefinance the ultimate big picture class, one that everyone (entrepreneurs, investors, analysts, business observers) should take.
Check rules of thumb : Investing and corporatefinance are full of rules of thumb, many of long standing. The second is that in my line of work, which is corporatefinance and valuation, the numbers I need lie in micro or company-level data, not in the macro space. Historical Growth Rate in Revenue/Earnings 1.
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.
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 hurdlerates, central to both corporatefinance and investing judgments. What's coming?
This is the last of my data update posts for 2023, and in this one, I will focus on dividends and buybacks, perhaps the most most misunderstood and misplayed element of corporatefinance. Viewed in that context, dividends as just as integral to a business, as the investing and financing decisions.
If you have taken a corporatefinance class sometime in your past life are probably wondering how this approach reconciles with the Miller-Modigliani theorem, a key component of most corporatefinance classes, which posits that there is no optimal debt ratio, and that the debt mix does not affect the value of a business.
I went into what’s called corporatefinance, what people would see now as sort of M&A department. CHANCELLOR: Well, I was actually in a sort of subgroup there, which was called corporate strategy. But I didn’t last very long there because I thought I didn’t like corporatefinance.
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