Is your investment advisor worth a hill of beans?

August 10th, 2012 by hackel Leave a reply »

Ask the following 8 questions:

 

1-Explain, in detail, once you’ve estimated the entity’s free cash flows, how you arrive at the discount rate?

HINT: It’s not what you learned in grad school or the CFA exam.

 

2-Explain, again in detail, all of the adjustments you make to the published financial statements, to arrive at an estimate of free cash flow?

HINT: Lots of adjustments are required.

 

3-How do you define return on invested capital?

HINT: We’re looking for cash on cash.

 

4-How do you define economic profit and when should it be use?

HINT, Because many companies are not capital intensive

 

5-Explain how companies account for (s) derivatives and (b) pensions and other post-employment benefits

6-How should value be derived?

HINT: It’s not through relative value, such as a firm’s PE against its peers or some index

7-How do you account for a firms over-spending or under spending?

8-Have you read “Security Valuation and Risk Analysis?

HINT: If not, call CT Capital LLC

 

 

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