Posts Tagged Business
When Average Earnings Are Not Representative
Posted by Tetyana Matychak in Business on September 3rd, 2010
For various reasons, value investors are encouraged to use an average of several years worth of earnings as an estimate of a company’s earnings power. But when a company grows quickly (e.g. through the acquisition of a competitor), average earnings are no longer representative of earnings power. In such cases, other methods of estimating a company’s earnings may be more useful.
Consider Canam Group (CAM), a company that has gone on a buying spree in the last year or so. As competitors have been shutting down units to conserve cash, Canam has been strategically purchasing competitor plants at attractive prices. As many industries are currently at overcapacity, the benefits of these acquisitions won’t be seen for years. But the costs of these acquisitions (i.e. the cash used to finance the purchases) are seen immediately. How does one value the fact that future earnings will be higher than past earnings?
One method applicable to manufacturing companies is based on a company’s historical return on its fixed assets. If similar assets to the company’s current assets have been purchased, the company may be expected to generate the same type of returns on those fixed assets that it generated over the last business cycle. Of course, this exercise only results in a starting point for estimating future earnings. Adjustments may have to be made based on the age of the assets acquired, their quality, and a whole slew of other factors (e.g. geography).
When times are good, companies will often fall over themselves in bidding wars to acquire potential targets or business units. Value investors realize, however, that the best time for companies to acquire such assets is when business conditions are poor (financing in general is hard to come by, there is overcapacity in many industries, and sellers are desperate to raise cash), due to the great price discounts that are available. Read the rest of this entry »
Hedge funds, private equity expect tax hike
Posted by Tetyana Matychak in Budget on May 19th, 2010
Private equity, real estate and hedge fund managers are increasingly resigned to a tax increase on their profits as U.S. lawmakers get set to vote next week on a long-delayed measure.
At issue is a change in the tax treatment of profits earned by partnership fund managers, known as “carried interest.” The measure would treat the profits as ordinary income subject to a 35 percent rate, more the double the 15 percent rate they are currently taxed at as capital gains.
The tax change, which lobbyists have managed to beat back for three years, has gained steam as lawmakers hunt for revenue to fund other popular tax breaks for business that have expired. Many lobbyists and former opponents now see passage of an increase as inevitable.
“Many people are resigned because it is round four,” said Francois Hechinger, a partner at BDO Seidman advising private equity and venture capital clients..
He added that they are still putting up a fight to try to soften the impact. “If it was really their choice they wouldn’t give up on it at all.”
The $20 billion or so of revenue that the tax change could raise over a decade would help pay for a politically popular group of tax breaks for individuals and business, including a corporate research and development tax credit. Read the rest of this entry »
Wal-Mart to slash grocery prices
Posted by Tetyana Matychak in Trading Markets on March 23rd, 2010
Wal-Mart Stores Inc will cut food prices and mount a new ad campaign over the next six weeks, a threat to other U.S. grocers that sent an industry shares index down more than 2 percent on Friday.
A Morgan Stanley analyst first reported the world’s largest retailer’s plan, calling it a major setback for other U.S. grocers, and the company confirmed the promotions in an email.
“While this helps address Walmart’s traffic woes, we view this as a major setback for the grocery stocks, which have been rallying on hopes of a return to more rational pricing,” Morgan Stanley analyst Mark Wiltamuth wrote in a note on Friday.
The Standard & Poor’s Food Retail Sub-Industry Index closed down 2.2 percent.
Walmart has used aggressive pricing in grocery and other units to bring shoppers into its stores. The grocery business is particularly pressured by such pricing, as its profit margins are already low. Read the rest of this entry »
Finding Something to Like About April 15
Posted by Tetyana Matychak in Business on March 18th, 2010
We’re smack dab in the middle of tax season, and I am done. I spent a couple of Saturdays gathering all of my bank statements and other documents, making post-closing general journal entries, and printing out financial statements to deliver to my C.P.A. for both our corporate and personal income tax returns. As my Canadian father would say, my books are now tickety-boo (translation: in perfect working order).
While I certainly don’t enjoy writing checks to the I.R.S., I have to admit that tax season offers an opportunity to take care of tasks that I’ve been putting off for the last 12 months. I keep my books fairly current throughout the year by downloading statements directly from my bank accounts into QuickBooks, but I always uncover some odd, creeping errors that need to be fixed at the end of the year.
I also seem to learn something new with each passing tax season. Our firm is structured as an L.L.C., and my husband and I are the only two members. As such, owners’ health insurance and medical expenses are not deductible business expenses. I swore at the beginning of 2009 that I was going to switch our high-deductible health insurance plan to one that qualified for a Health Savings Account. Like so many other administrative tasks, that one sat on the back burner and never got done.
As luck would have it, 2009 happened to be the year that my husband needed surgery to repair his eardrum. Poof! There went more than $3,000 in out-of-pocket medical expenses that could have been paid using pretax dollars set aside in an H.S.A. Ugh! At least our new plan is set up and in effect for 2010, so I won’t be making that mistake again. Read the rest of this entry »
Do All Small Businesses Need a Mobile Strategy?
Posted by Tetyana Matychak in Business on March 17th, 2010
At the Mobile Premier Awards — an international competition for mobile start-ups held last month at the Mobile World Congress — the message was clear: Web sites are old school, and mobile is a growing requirement for every industry and business.
Investors and entrepreneurs who judged and won at the M.P.A. competition were eager to offer tips and predictions to help all business owners — not just those with technology companies — prepare a mobile strategy. Here are some of their suggestions:
First, every company should try to become “visible” to mobile devices. “The idea is that if a consumer is looking for you on the run,” said Chetan Sharma, a mobile consultant who judged at the M.P.A. competition, “your info must be available in any format where they are looking to consume that information — or else you miss an opportunity.”
While smartphones can access most Web sites, the content in most sites isn’t coded to be read or found by people using devices on the go, with small screens and mobile browsers, search engines and operating systems. Smartphones, for example, can’t read Flash content, which many dance clubs and restaurants favor to create aesthetically pleasing sites. Read the rest of this entry »
The Secret to Having Happy Employees
Posted by Tetyana Matychak in Business on March 16th, 2010
About 10 years ago I was having my annual holiday party, and my niece had come with her newly minted M.B.A. boyfriend. As he looked around the room, he noted that my employees seemed happy. I told him that I thought they were.
Then, figuring I would take his new degree for a test drive, I asked him how he thought I did that. “I’m sure you treat them well,” he replied.
“That’s half of it,” I said. “Do you know what the other half is?”
He didn’t have the answer, and neither have the many other people that I have told this story. So what is the answer? I fired the unhappy people. People usually laugh at this point. I wish I were kidding.
I’m not. I have learned the long, hard and frustrating way that as a manager you cannot make everyone happy. You can try, you can listen, you can solve some problems, you can try some more. Good management requires training, counseling and patience, but there comes a point when you are robbing the business of precious time and energy. Read the rest of this entry »
Starting Over at 55
Posted by Tetyana Matychak in Business, Favourites on March 15th, 2010
AFTER 24 years as a marketing manager for Coors, Cinde Dolphin knew what was coming — Miller and Coors had just merged their United States beer operations, and hundreds of jobs were sure to be eliminated.
Worried that these youth-oriented companies might lay off an old-timer like her, Ms. Dolphin decided to take a buyout and relax. She sunned on the beaches of New Zealand, went whitewater rafting on the Yampa River in Colorado and saw friends and Broadway shows in New York.
But after a few months, she realized that she missed working. So at age 55, she began applying for marketing jobs, confident she would be quickly hired because of her Coors pedigree. “About four months into my job search, I realized I wasn’t getting many callbacks,” she said.
A Sacramento resident who has survived three bouts with cancer, Ms. Dolphin is not one to give up easily. She decided on an alternate tack — she would start her own business and thus join the nation’s fastest-growing group of entrepreneurs, those age 55 and above. Read the rest of this entry »
If You’re 50 and Haven’t Saved A Dime
Posted by Tetyana Matychak in Budget on February 9th, 2010
You’re 50, recently laid off, and now forced to figure out what work you’ll do for the next 15 years or more and how you’ll ever retire.
You’d dreamed of leaving your job at 65, vacationing in Tuscany, taking a trip around the world, or perhaps spending your afternoon on the golf course. But the reality is the economic downturn has tripled the number of unemployed wokers ages 55 to 64 over the past two years, compared with a doubling in the overall unemployment rate.
That means right now, for you, Job Number One is figuring out the next career you’ll embark on. This is the “new retirement” that many Baby Boomers (born between 1946-1964) must now envision.
The rise in job losses, grim prospects for Social Security benefits, and paltry personal savings has created a situation where many Boomers must put off retirement from the workforce because they simply cannot afford it. Even before the recession, the Congressional Budget Office predicted the Social Security Administration would be doling out more money than it took in by 2020, which would deplete the trust fund and cause a severe cut in benefits by 2043. Read the rest of this entry »
-
Consumer Spending in U.S. Rises More Than Forecast
30 August 2010
Monetary Policy Gets No Respect
19 July 2010
Stocks May Surprise By Year-End
5 July 2010
Is A Global Reserve Currency A Necessity?
28 June 2010
Recent Comments