johnnyblazini Wrote: ------------------------------------------------------- > On a, b, d, e and f: > > I like to think about liabilities (as well as > equity) as how you fund a company. Taking on a > commitment is not helping you fund your venture, > it’s a mere bet on the future which could have > positive or negative impacts on your business. In > other words you are simply raising the risk > profile for your business (greater expected > earnings variance). > > I would use a higher discount rate for a company > with holding many bets, and of course I would take > account of bets that clearly look like losers (or > winners). > > But I wouldn’t discount the whole value of the > commitment to the present and use that number as a > liability. Perhaps I’m wrong, but I believe that > is how the CFA books prescribe we deal with > this…?!? > > > On c: > > Lets assume that MCD purchases the right tools… > > > > Btw, is this your first time writing level II? Johnny - Liabilities are clearly broader than “how you fund your company”. Raising the discount rate on (something) to account for derivative exposure that might be risk decreasing/increasing/distribution changing etc just isn’t the way to go and there is no way that CFA suggests that. There is reasonable controversy in the accounting world about MTM vs not (I lean highly toward the MTM side because I don’t trust anyone). Suggest you check out some of that stuff. I passed LII years ago.
So, you’re just hanging out here for fun? I understand the dichotomy between how I and CFAI looks at this… But I still think I’m right… Btw, you should understand that I have been speaking theoritically on this, as the cost would probably outweight the benefits in most cases… Perhaps “liabilities are broader” than what I have been suggesting, but perhaps, we account for things in the wrong way. If we are analysts, well, that is probably how we should wish to look at equity and liabilities. I’m fairly up to date on the MTM stuff. I suspect that MTM should be applied on a Made To Measure basis. That is as far as my opinion goes on the subject… (for the moment) Thanks for the conversation. It’s been real…