Uploaded February 2025 | Updated September 2026, 1 week ago
In this session, we began by continued with our discussion of why we capitalize lease commitments and R&D expenses, and how they affect valuation inputs. We continued our discussion of cash flows, by first putting to rest some final issues on earnings, including the tax rate to use in computing after-tax cash flows and dealing with money losing companies. In the process, we did look at what to do about accounting fraud, and while the answer is not much, there may be a role for forensic accounting. To be honest, most forensic accounting books are designed for valuation morticians, but here are a couple that you may find useful:
amazon.com/Financial-Shenanigans-Accounting-Gimmicks-Reports/dp/0071703071/ref=pd_sim_b_8
amazon.com/Creative-Cash-Flow-Reporting-Sustainable/dp/0471469181/ref=pd_sim_b_2
Finally, if you want to take apart a company’s financial statements, looking for clues on profitability, you might find my most recent data update post useful:
aswathdamodaran.blogspot.com/2025/02/data-update-7-for-2025-end-game-in.html
Start of the class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/cftests2.pdf
Slides: nyu.box.com/s/3nwim0nfnm9uuuvsl1lzzqifr06sd9or
Post class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session9Btest.pdf
Post class solution: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session9Bsoln.pdf
In this session, we began by continued with our discussion of why we capitalize lease commitments and R&D expenses, and how they affect valuation inputs. We continued our discussion of cash flows, by first putting to rest some final issues on earnings, including the tax rate to use in computing after-tax cash flows and dealing with money losing companies. In the process, we did look at what to do about accounting fraud, and while the answer is not much, there may be a role for forensic accounting. To be honest, most forensic accounting books are designed for valuation morticians, but here are a couple that you may find useful:
amazon.com/Financial-Shenanigans-Accounting-Gimmicks-Reports/dp/0071703071/ref=pd_sim_b_8
amazon.com/Creative-Cash-Flow-Reporting-Sustainable/dp/0471469181/ref=pd_sim_b_2
Finally, if you want to take apart a company’s financial statements, looking for clues on profitability, you might find my most recent data update post useful:
aswathdamodaran.blogspot.com/2025/02/data-update-7-for-2025-end-game-in.html
Start of the class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/cftests2.pdf
Slides: nyu.box.com/s/3nwim0nfnm9uuuvsl1lzzqifr06sd9or
Post class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session9Btest.pdf
Post class solution: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session9Bsoln.pdf
