Sunday, November 4, 2007
If a company has weak accounts watch out
Three Suggestions for investors: First,beware of companies displaying weak accounting. If a company still does not treat options as an expense, or its pension assumptions are fanciful, watch out.
When managements take the low road in aspects that are visible, it is likely that they are following a similar path behind the scenes. There is seldom just one cockroach in the kitchen.
Trumpeting Ebitda is a particular pernicious practice. Doing so implies that depreciation is not truly an expense, given that is a "non-cash" charge. That is nonsense.
Second, unitelligible footnotes usually indicate untrustyworthy management. if you cannot understand a footnote or other managerial explanation, it is usually because the chief executive does not want you to.
Finally, be suspicious of companies that trumpet earning projections and growth expectations. Businesses seldom operate in tranquil, no surprise projection and growth expectations.
Let the recent sembmarine froeign exchange lossses be a reminder to investor to watch out for company that have weak account.