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TIP346: Masterclass in Valuation w/ Chris Bloomstran
We Study Billionaires - The Investor’s Podcast Network
The Normalization Process for Defining Benefit Plans
The process involves adjusting actuarial assumptions for defined benefit plans to align with realistic expectations of returns due to low interest rates and expensive stock prices. By normalizing the cash outflow from the corporation for funding pension plans, discrepancies between assumed returns and actual returns are accounted for. This normalization process prevents underfunded plans from misleading investors by distributing funding deficits over time. It also emphasizes the importance of understanding industry-specific metrics and using them to evaluate companies effectively, especially when dealing with varying levels of leverage.
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