Hey friends. Having spent my career as an accounting professor, I’ve often come across people who, when they hear the term “accounting,” respond abruptly with “I hate math.” Indeed there is a fairly broad misconception that accounting is primarily about math and is therefore a hard and unpleasant subject to learn or discuss. Let me explain. […]
The practice of accounting records assets to the balance sheet initially at their cost of acquisition. This means that assets are initially booked at fair value. That is, they are recorded at their cash value in an otherwise arms-length transaction. […]
Accrual accounting is an important concept to investors’ understanding of earnings. Since earnings drive stock prices, understanding something about how earnings are measured is surely relevant to investing in common stocks. Accrual accounting is the basis by which earnings are measured under generally accepted accounting principles (GAAP). […]
When it comes to assessing the value of a company today, the financial statements clearly play an essential role. Without the financials, we simply would not even have a place to start.
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