Posts by: Guest 1| Wall St. Training

Interest expense on Converts
If we did not adjust for the dilutive effect of convertible notes, shouldn't we had to adjust the numerator of the diluted EPS since this is calculated assuming the notes were converted and as such the interest expense on converts was added back to NI (as per p.25 on COSTCO's 10Q)? I appreciate y... Read More

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by Guest 1.

added 11 years ago

Ev calc? Inlcude postretirement liab's and pension liab's?
I am looking at CTB and need help clarifying whether I should include the company postretirement liab's as part of net debt when calculating net debt. The company is underfunded and the inclusion, or exclusion of these liablities will have a significant impact to it's EV calc and the company's asso... Read More

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by Guest 1.

added 11 years ago

RE: Capital leases revisited x2
Capital leases are capital leases b/c the accountants said so. Else they would be operating leases and off-balance sheet. Operating leases are generally not added back to debt for valuation purposes as they are considered operating in nature and not capital structure in nature. See above question on... Read More

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by Guest 1.

added 11 years ago

RE: Accounting: ROC
The "interest" used in Return on Capital formula is the "interest expense". Here is my explanation; Capital of the company will come either from the debt holders or the shareholders. As we are trying to find out the return on capital, we have to take into consideration the return for both t... Read More

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by Guest 1.

added 11 years ago

Accounting changes
Hi there,

What is the decision rule to adjust financials for changes in accounting policies? Because for some companies we adjusted (like COSTCO) but for others we didn't. So, when do we have to adjust and when not?

Thanks for your help.

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by Guest 1.

added 11 years ago

SHLD Inputs on complex tr comps
Hi, I have some questions in relation to the SHLD class: (1). When should we use Pro Forma numbers and when not? Is there any decision rule in this case? (2). Since we are trying to capture the core, recurring and sustainable profitability, shouldn’t we have excluded the “Credit and financ... Hi, I have some questions in relation to the SHLD class:

(1). When should we use Pro Forma numbers and when not? Is there any decision rule in this case?

(2). Since we are trying to capture the core, recurring and sustainable profitability, shouldn’t we have excluded the “Credit and financial products revenues” given that on page 39 of the 10K the company states that these revenues are “not expected to re-occur” (due to the sale of the Credit and Financial Services operations on November 2005)?

(3). I’m still not sure about the credit card adjustment. As it also appears in the 2004PF figures, it gives the idea that is a recurring item and part of the credit card business. Isn’t it enough to indicate that this is not a one-time item and therefore we wouldn’t have to adjust for it (also note that the amounts are very similar, $65MM in 2005PF, and $64MM in 2004PF)? If the instructor’s theory (that the company may have taken the opportunity to write-off this item) was true, I presume we would see very discrepant amounts from in these 2 years; does that make sense for you? Also, isn’t it an arbitrary decision to determine that these values are one-time items?

(4). We didn’t adjust for the EPS impact of the $317MM because the company stated it was offset by the correspondent minority interest expense. However, if we think about it the minority interest is going to happen every year, it is a recurring item and will continue to affect results. On the other hand, the gain on sale of assets is a one-time item and is not part of the business, and since we are trying to get the sustainable profitability we would subtract it out from EPS as well. So, don’t you think we are overstating the company’s normalized EPS since we didn’t adjust this item? And also, we are netting a recurring item (MI) with a non-recurring item (gain on sale of assets), isn’t it the old story of apples to apples?

(5). In the other companies we did, when the company gave us the EPS impact on a diluted basis of the one-time item, we directly input it on the “Adjustments per share” on our model. Why didn’t we do the same in the case of SHLD, since the company gave us this data (gain on sale of assets – 2005PF $0.15; restructuring charges – 2005PF $0.33; p.26 on the 10K)? Note that by using them our normalized EPS moves from $5.68 to $5.59, a considerable difference.

(6). If we have goodwill impairment in the financials, should treat it as a one-time item and reverse it (positive impact on the normalized EPS)? If yes, no tax effect, right? (since GW is not tax deductible we would sum it to EPS directly).

Thanks for your help.
Cheers. Read More

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by Guest 1.

added 11 years ago

Re: Discounted EVA approach
Thanks for the reply to the initial question, but i have a follow-up I would welcome your perspective on. It is appropriate to think of EVA as a 1-time instance of value-creation or a perpetuity? I.e. if you invest capital at an X return and it cost Y and the spread between X and Y creates economi... Read More

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by Guest 1.

added 11 years ago

Re: Ev calc? Inlcude postretirement liab's and pension liab's?
LTD $350mm, cash $233mm, postretirement benefits (liability) $290, pension benefits (liablity) $360mm. I'm calculating TEV starting at market cap and adding net debt. Should the postretirement and pension liabilities be included in net debt calc? How are the comps liab's relevant? The question i... Read More

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by Guest 1.

added 11 years ago

Accounting: KEY RATIOS....
Is it necessary to memorize all the ratios to do the exercises in the advanced courses? Also, do employers expect financial analysts to know these ratios by heart, or is it okay to use the references for the ratios when building the actual financial modeling? I never worked as a financial anal... Read More

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by Guest 1.

added 11 years ago

No most recent Q available
Hi there, A quick question on LTM and/or calendarization: let's say one of the companies in our comps universe hasn't released the most recent's quarter earnings, and we have data for all the others: would we include 1/4 of the FY1 estimated results or simply leave it as is, without the last quarte... Read More

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by Guest 1.

added 11 years ago