All GLG News Analyses Filed Under: Financial Forecasting & Analysis

Robert KempProfessorUniversity of Virginia - CC

Pension Pressure Reduced - Good News For Corporate Valuation

November 15, 2007

Analysis of:Out of the Shaows? PBGC Deficit Shrinks by $5 billion. | www.cfo.com

The reduction of the PBGC's deficit reduces pressure on Congress to take action that could impact corporate values.   Such action would most probably hurt corporate value by adversely affecting cash flow and risk.

Extending or “Stretching” of Payables – A Common Cash Flow Manipulation Technique

November 13, 2007

Analysis by: GLG Expert Contributor

Analysis of:6/30/06 Form 10-K for Cardinal Health (CAH) | www.sec.gov

This post specifically discusses the potential for significant distortions to operating cash flow due to material levels of extending or "stretching" of payables. The "Analysis" section below provides an actual public company example of how operating cash flow can be impacted and illustrates several recommended steps on how to analyze if a company is engaging in such activities.

Importance of Marginal Cost on Coimpetition and Capacity utilisation

November 5, 2007

Analysis by: GLG Expert Contributor

Analysis of:Microsoft vs. Google : The New Battle for Control of Your Network | seekingalpha.com

    In the global scenarioo of timelag between capacity creation and utilisation , concept of marginal costing is one of prime importance in pricing decision. Unlike fixed pricing norm, this makes pricing model totally variable and flexible, optimising revenue and usage of capacity. The basic thinking which guides this principle is the underlying fact that capacity for a particular time is a perishable resources. Capacity under utilised is a permanent loss of opportunity and any realisation that covers the marginal cost contributes towards return on the perishable resource i.e capacity vailable. 

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Marginal Costing - The Relevance for Financial Analysis

November 2, 2007

Analysis of:Microsoft vs. Google : The New Battle for Control of Your Network | seekingalpha.com

Cost  management  and  analysis  is  a  very important aspect  of  financial planning  and  financial statement evaluation. Cost  data  and  especially  marginal  and  differential  cost  data  can play a  very important constructive role in this arena. Marginal cost has not been given the  due importance it  deserves in this  area  for  reasons  that  I am unable to  decipher. In this analysis I take a  look  at  the  importance of  marginal and  differential cost  as  applied  to  evaluation of corporate financial statements.

Robert KempProfessorUniversity of Virginia - CC

Financial Analysts Beware: The Rules of Pensions Are Always Changing

October 31, 2007

Analysis of:PBGC sets new pnsion benefit limit for 2008 | money.cnn.com

1)  The PBGC increasing the amount of insured benefits for qualified, defined benefit plans is a normal, annual event. 2)  Ignoring the impact of this increase on firm valuation can be problematic. 3)  Financial analysts, following mature and declining industries and firms, must pay particular attention to this increase due to solvency and liquidation issues. 

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Cash Flow - The true reflection of financial health - Misleading Indicators

October 29, 2007

Analysis of:Cash Flow Manipulation – Analyzing and Identifying | theharrissolution.com

Cash flow  and  profitability  manipulation  are  two  age  old  devices  used  by  unscrupulous managements  to  mislead  investors, lenders  and  a  host  of  other stakeholders. In this  analysis  I  look  at  how  the  constituents  of  cash  flow  are  a  better  indicator  of  financial  health  than  pure  profitability  or  asset/liability  figures.

Paul MillerProfessorREGENTS OF THE UNIVERSITY OF COLORADO

Cash flow manipulation is real

October 29, 2007

Analysis of:Cash Flow Manipulation – Analyzing and Identifying | theharrissolution.com

You can never judge a book by its cover or a seminar by its flier, but Harris Solutions is on to something here.  If you have accepted the SCF as pure and not manipulable, you may very well want to attend to find out more about the sly maneuvers on the fringes of GAAP that pump up the operating cash flow.  A couple of examples appear below.

“Cash is King” - A Formula for Estimating “Normalized” Operating Cash Flow

October 29, 2007

Analysis by: GLG Expert Contributor

Analysis of:Cash Flow Manipulation – Analyzing and Identifying | theharrissolution.com

The cash flow statement is often considered to be one of the “cleaner” areas of the financial statements. However, there are numerous ways in which operating cash flow (and free cash flow) can be manipulated within the boundaries of U.S. GAAP.  The "Analysis" section below provides a formula which can be a useful tool for investors to estimate normalized operating cash flow on a broad-base of companies.

Impact of Joint Venture Agreements between European and US Airlines.

October 22, 2007

Analysis by: GLG Expert Contributor

Analysis of:Air France-KLM, Delta form joint venture | www.businessweek.com

1. The new open skies agreement on Airlines Services between the United States and Euope will provide European Carriers greater access to Domesctic US markets. The European Carriers will take advantage of a lower US Dollar compare to the Euro to gain more revenue from advertising a cheap fare to US. 2. Delta must gain more markets in Europe and beyond in order to share in the increaing revenue of this joint venture. Future joint venture must negoiate the beyond Europe markets that has been bloked by European Airlines. 3. The competition will allow the consumer to benefit from low fare as long as there is no price fixing and price increase initiatives that start with one gruop and followed by others. 

When making investment decisions, the more information you have, the better...

October 19, 2007

Analysis by: GLG Expert Contributor

Analysis of:Scholars Link Success of Firms To Lives of CEOs | online.wsj.com

This article and the studies referenced within, show the importance of analyzing all available information in your investment decisions.  Although some of this data and the analysis is a little "outside the box" in terms of the normal analysis and decision making process, and some of the steps may be considered intrusive by some, it is a very interesting read and demonstrates how all information can potentially be helpful.  There is so much information publicly available these days, for those of us who know how to collect and analyze the data, it could produce a unique investment edge. 

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