A Deep Dive Into Earnings Quality with Columbia Professor Doron Nissim
Excess Returns
00:00
The Balance Sheet Doesn't Report the Value of Operations
When it comes to operating activities, the balance sheet doesn't give us the value for operations. The fact that we don't report investments in intangible assets on the balance sheet, we expense them. And the fact that we write down investments when they're not successful, and we don't write them up when we make good investments. All these distortions make balance sheet not reflect the value of operations. But this is not the case for financing. So how do we value a business? We value a business by separately valuing the operating and the financing. If you take all the cash away from the business, the business will not be able to operate. You need to have cash the same way that
Transcript
Play full episode
