Comments on: Fundamental Analysis for Solvency and Earnings Quality http://www.billakanodoodahs.com/2006/09/fundamental-analysis-for-solvency-and-earnings-quality/ Trading, Investing, Politics, Whatever Sat, 06 Sep 2008 18:52:40 +0000 http://wordpress.org/?v=2.3.3 By: TheValueBlogs » Fundamental Analysis for Solvency and Earnings Quality http://www.billakanodoodahs.com/2006/09/fundamental-analysis-for-solvency-and-earnings-quality/#comment-145 TheValueBlogs » Fundamental Analysis for Solvency and Earnings Quality Sat, 07 Oct 2006 18:38:16 +0000 http://www.billakanodoodahs.com/2006/09/fundamental-analysis-for-solvency-and-earnings-quality/#comment-145 [...] To continue reading click here. [...] […] To continue reading click here. […]

]]> By: Bill http://www.billakanodoodahs.com/2006/09/fundamental-analysis-for-solvency-and-earnings-quality/#comment-105 Bill Tue, 26 Sep 2006 13:12:02 +0000 http://www.billakanodoodahs.com/2006/09/fundamental-analysis-for-solvency-and-earnings-quality/#comment-105 @Mark: it normalizes for leverage and taxation rates across companies. That way if I compare companies for earnings quality, special tax benefits (like synfuel investments) and different amounts of leverage don't get in the way. Glad you love the site! @Russell: you can derive effective interest rate from the data at MSN. Take interest payments from the income statement and divide by the average (over most recent and last period) long-term debt from the balance sheet. I find it useful to build a spreadsheet for the analysis and just copy and paste the information into it. @Mark: it normalizes for leverage and taxation rates across companies. That way if I compare companies for earnings quality, special tax benefits (like synfuel investments) and different amounts of leverage don’t get in the way. Glad you love the site!

@Russell: you can derive effective interest rate from the data at MSN. Take interest payments from the income statement and divide by the average (over most recent and last period) long-term debt from the balance sheet.

I find it useful to build a spreadsheet for the analysis and just copy and paste the information into it.

]]> By: Russell http://www.billakanodoodahs.com/2006/09/fundamental-analysis-for-solvency-and-earnings-quality/#comment-104 Russell Tue, 26 Sep 2006 13:06:06 +0000 http://www.billakanodoodahs.com/2006/09/fundamental-analysis-for-solvency-and-earnings-quality/#comment-104 The biggest headache I find is the "system gaming" that so many companies seem to get involved with. It is very hard to compare numbers across long periods of time with some companies because of the frequent accounting changes. One item you can sometimes use is the firm’s current cost of capital. It can be very telling that a firm is borrowing at 8.9% when its competitors are able to borrow at 5.2%. Particularly telling if the firm does not appear to be otherwise loaded up with debt. The biggest headache I find is the “system gaming” that so many companies seem to get involved with. It is very hard to compare numbers across long periods of time with some companies because of the frequent accounting changes.

One item you can sometimes use is the firm’s current cost of capital. It can be very telling that a firm is borrowing at 8.9% when its competitors are able to borrow at 5.2%. Particularly telling if the firm does not appear to be otherwise loaded up with debt.

]]> By: Mark http://www.billakanodoodahs.com/2006/09/fundamental-analysis-for-solvency-and-earnings-quality/#comment-103 Mark Tue, 26 Sep 2006 12:22:08 +0000 http://www.billakanodoodahs.com/2006/09/fundamental-analysis-for-solvency-and-earnings-quality/#comment-103 Regarding EQ metric #1: I don’t see why you would add inc taxes paid and interest payments to both the numerator and denominator…you are still essentially comparing the size of NI and CFO. Could you please help me to understand? Love the site! Thanks Regarding EQ metric #1: I don’t see why you would add inc taxes paid and interest payments to both the numerator and denominator…you are still essentially comparing the size of NI and CFO. Could you please help me to understand? Love the site! Thanks

]]> By: news.fatpitchfinancials.com http://www.billakanodoodahs.com/2006/09/fundamental-analysis-for-solvency-and-earnings-quality/#comment-101 news.fatpitchfinancials.com Tue, 26 Sep 2006 11:20:23 +0000 http://www.billakanodoodahs.com/2006/09/fundamental-analysis-for-solvency-and-earnings-quality/#comment-101 <strong>Fundamental Analysis for Solvency and Earnings Quality...</strong> In order to minimize the risk of losing capital through adverse company-related events, there are a variety of financial metrics they can use, but this post will focus on solvency and earnings quality metrics.... Fundamental Analysis for Solvency and Earnings Quality…

In order to minimize the risk of losing capital through adverse company-related events, there are a variety of financial metrics they can use, but this post will focus on solvency and earnings quality metrics….

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