In 2018, I put together a small booklet titled An Introduction to Money and Banking which I gave out to friends, potential clients, and anyone who I thought would be interested. One goal of mine was to provide readers with a better understanding of the U.S. central bank, The Federal Reserve, particularly in the aftermath […]
Money and Banking Part 1: Introduction Read More »
In a previous post, I provided a brief sketch of the life and career of legendary investor Charlie Munger. In this post, I want to provide some thoughts on what I believe is Munger’s greatest contribution: his advocacy of multi-disciplinary self-learning. Charlie Munger, who passed away on November 28, 2023, at the age of ninety-nine,
Charlie Munger and the Multi-Disciplinary Approach to Business Read More »
This essay is the first in a two-part series on the life and legacy of Charlie Munger. Charlie Munger, Warren Buffett’s partner and long-time vice chairman of Berkshire Hathaway, died on Tuesday November 28th, 2023, at the age of 99. Early Life Charlie Munger was born on January 1, 2024, in Omaha, Nebraska to Alfred
The Life and Career of Charlie Munger Read More »
This post is the last in a series covering financial ratios. In previous posts, we discussed ratios which measure profitability and working capital efficiency. In this post, we cover credit ratios. Credit ratios help investors, lenders, and managers determine a firm’s ability to satisfy debt obligations. Naturally, lenders are concerned about a firm’s ability to
Credit Ratios Introduction Read More »
We refer to the ratios covered in this post as activity ratios. These ratios measure the efficiency with which the company is managing its operating working capital. This post is the fourth in a series about financial ratios. We previously explored return on invested capital, return on common equity, and other profitability ratios. To reiterate
Activity Ratios Introduction Read More »
We devoted previous posts to two important profitability ratios: return on invested capital (ROIC) and return on common equity (ROCE). These two metrics are arguably the most important metrics for determining the economics of a business and how well management is utilizing the company’s resources. However, there are several other ratios which can help managers
Profitability Ratios Introduction Read More »
Previously we introduced a profitability ratio known as return on invested capital (ROIC). This ratio measures the amount of operating profit per dollar of total capital employed in the firm. But equity investors are often interested in the earnings generated on shareholder capital only. For this, we use a measure called return on common equity
Understanding Return on Common Equity Read More »
In a previous post, we discussed a metric called return on invested capital (ROIC) and its variant, return on incremental invested capital (ROIIC). ROIC measures the after-tax operating earnings generated per dollar of average total capital, while ROIIC measures the incremental operating earnings generated per dollar of additional capital employed in the business. These measures
The Hurdle Rate – Understanding the Cost of Capital Read More »
One mistake I see many small business owners make is to focus on the “bottom line”, i.e., the profits of the business, while ignoring the amount of capital necessary to generate those profits. Profit as a stand along measure tells us relatively little about the economics of the business. For example, consider two companies each
Managing Your Business for Profitability – Understanding Return on Invested Capital Read More »
In the investment world we constantly hear about the importance of “thinking like an owner,” particularly in reference to the short holding periods of most money managers. However, in the small business world, the opposite is often true – business owners who fail to think like capital providers. If you are a small business owner,
Financial Management: A Brief Guide for Small Businesses Read More »
