Morgan Stanley IM: Good Losses, Bad Losses
All Losses Are Not Created Equal21.07.2022 | 07:41 Uhr
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- Accounting is the language of business and certain principles, including conservatism, guide how accountants reflect the range of business activities on financial statements.
- Investors must look past simple measures of profits to understand a business’s true ability to create value.
- The rise of intangibles means more investments than ever are expensed immediately versus capitalized, which makes the financial statements of today appear distorted relative to those of the past.
- Academics distinguish between GAAP losers, companies that have losses but a high return on investment, and real losers, or those that have expenses unrelated to investment that exceed sales.
- Evidence from recent decades shows that GAAP losers produced attractive total shareholder returns relative to the real losers and profitable companies.