I agree with wanderingcfa… earnings from investments without cf basically explains all of MTM accounting and by that extension you should consider just about any financial institution of fraud… that was a lame @ss answer from schweser
Not necessarily. I’ve just looked at an investment that promotes itself as an asset backed lender. It has basically 0 vol, and 14%-15% annual returns (15.5,13.6,14.5 over 3 years). Several of my yellow/red flags go off on the no return without risk front before I look at them. So I ask about valuation - and all the loans are HTM, so they are recorded as par loans. Then I see it’s actually a fund of asset backed lenders. So even if I bother to ask for a cash flow statement to check that the returns actually exist, they will all be listed as equity investments, and the cash flows won’t be consolidated (and all the underlying funds will accumulate income). I can’t check the underlying leverage of the funds, because they are all equity investments. I have no way of checking that what they say is happening is actually happening. That’s not to say they might not be scrupulously honest, but I simply have no way of checking. So having a large proportion of income coming from equity investments that don’t generate cash flow means that you really have to be very careful.
yeah, that’s tricky. the non-recurring income stuff being in revenue is bad, but it doesn’t overstate net income, but it does overstate “operating earnings” “earnings power” etc… equity income not generating cash flow is completely standard.
- D? 2. A?
dinesh - the answer was posted miles above, and the thread subsequently became a discussion of why. Come on mate, you can answer the questions without posting them - no need if the answer is already there.
Been out of touch with AF and just quickly logged in to answer few questions (when my manager was not around :-)). In all the haste, forgot to check if the answer was already there. But I don’t feel all that good after hearing the answer is incorrect for Q1. Will read this thread sometime late tonie and will try contributing.
^^ … Its hilarious that people are “hiding” from employers to sneak in a bit of studying !! siighhh…the good ole days of school/college where…we used to sneak AWAY from studying…
hahahaha… good old school bunking days!! We can’t do a mass bunk in this company man; it’s against their IT policies. If they catch me with those RED books RED-handed, I might get sufficient amount of time to sit home and study till 7th June, which is good in-a-way but I also like the GREEN flowing into my account at all time. So whilst I sit pretending to work, I have a mini-AF window open and the paper-weight kept on F5 button.