Why net depreciation from capex for computing reinvestment rate

We recently came across a question on Quora about why Prof. Damodaran subtracts “depreciation from capex when computing the reinvestment rate of a business.” It further goes on to state the following: "In his book, [Prof. Damodaran] seems to argue that depreciation is a cash inflow that pays for a part of capex, but I don't … Continue reading Why net depreciation from capex for computing reinvestment rate

Demonetization Blues: Mutual Fund Performance during the latest Correction

What had been a fairly decent year for the equity markets till September 2016 was marred by demonetization in the last two months of the year. The markets gave up most of the gains and ended up marginally positive for the year. Nifty 500 (the index which we feel represents the broader Indian market) reached … Continue reading Demonetization Blues: Mutual Fund Performance during the latest Correction

Putting numbers to the Welspun scandal

Welspun India has been marred in a controversy over supply of fake Egyptian cotton to its US customers like Target and Walmart. Given this controversy, investors are running away from the company using adages such as 'there is never just one cockroach in the closet'. Investors using such adages as crutches without considering the monetary … Continue reading Putting numbers to the Welspun scandal

The Biggest Problem with Price-to-Sales Ratio

The problem of inconsistency and how it can lead to erroneous conclusions... Ratios (or multiples) are a popular tool that many analysts employ to identify cheap stocks. Similar ratios (such as a Price-to-Earnings, Price-to-Sales, etc.) are compared across firms and a company with a lower multiple is considered cheap relative to one that has a … Continue reading The Biggest Problem with Price-to-Sales Ratio