By Aswath Damodaran. Originally published at ValueWalk.
In computing the optimal debt ratio for a company, we often rely on the most recent year’s financial statements.
Get The Full Warren Buffett Series in PDF
Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues
While that does give you the most updated numbers for a company, the most recent year’s earnings may not be a good indicator for long term borrowing capacity, for cyclical or commodity companies or companies with one-time losses/profits. In this session, I look at ways of deciding the optimal, when you decide to look past just the last year’s earnings.
Slides: http://www.stern.nyu.edu/~adamodar/pd…
The post In Practice Webcast 10b: Estimating an Optimal Debt Ratio – Special Cases appeared first on ValueWalk.
Sign up for ValueWalk’s free newsletter here.