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On why ROIC instead of ROE/ROA: ROE and ROA are distorted due to differing debt levels and tax rates. It does not allow you to measure the true underlying “returns generating capability” of the company. Quoting an example from Greenblatt’s book, you can imagine that you can have Company A that has no debt, and … Continue reading

Never Take on Leverage

Quotes from Warren Buffett's speech at the University of Florida School of Business on October 15, 1998:  "… if you $100 million at the beginning of the year, and you will make 10% if you are unleveraged, and 20% if you are leveraged…. what difference if at the end of the year, you have $110 … Continue reading

Margin of Safety and the Rules of Investing

I think Warren Buffett once said this of Investing: Rule No.1: Never lose money. Rule No.2: Never forget Rule No.1 I had thought that I fully understood the rules, but apprantly not well enough to practice it =) A more pertinent rule to hammer in would be “Margin of Safety“. Though its a means to … Continue reading

Late Filing and Delisting

So, one of the companies I'm in is not going to file its 10-K on time, and is potentially going to get delisted. Hence my "sudden" interest in this topic =) To summarize, for the NYSE, a company gets a grace period of 9 months from the deadline, after which NYSE will determine whether or … Continue reading

DCF Value and Enterprise Value

The process/formula to obtain the Instrinsic Value (IV) of a firm using Discounted Cash Flow (DCF) is very similar to the process for calculating a firm's Enterprise Value (EV). I had wanted to see the logical link between these two values. To summarize and simplify, let FV = value of the firm due to the discounted … Continue reading

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