I’m not surprised. Hopefully any republican women will be though.

WEEEEEEEEE!!!

Secondly, your little exposé on cash. If I have a $5000 bill to a supplier due on the 30th, and I wait to pay it until the 1st in an effort to show a stronger financial position on my EOM financial statements…the net effect of that “manipulation” is zero. Do you not understand balance sheet accounting?

Third, I submit to you that it’s very unlikely (but not impossible) to have positive earnings and a negative ROI. I don’t use ROI because it’s not relevant. I’ve submitted multiple business plans to my banker, and none of them has ever included an ROI analysis. I have strategic plans, marketing plans, in-depth market research, current balance sheet, last 3 years income statements, projected income statements and balance sheet. No IRR or ROI. Ever. It’s not relevant.

You said ROI was the “here and now” – that’s just false. By definition, an ROI analysis takes into account multiple streams of cash/earnings in the future. That’s the whole purpose of a “return” it’s a rate. An interest rate. And, by definition, interest is the value of money over time.

So how can ROI be in the here and now?

Look, the ROI can be a valuable tool for certain applications. If I were to consider buying a machine, and that machine would generate cash flow in some form over time, THEN and IRR or ROI analysis would be appropriate.

Or even if I have the opportunity to buy a business for a set price, and I know that I can generate cash flows from that business in the future. Then the comparison of the cash flows with the investment in the businss would be a handy piece of analysis. THAT would be an ROI.

But, an ROI is measured in percent, and a business is measured in dollars. No business is valued via an ROI.

What’s a justifiable price for stock in a company? Simple: the NPV of all the future cash flows plus the net equity in the company. Divided by the outstanding number of shares. If that comes out to be $20/share and the stock is currently trading at $15, then it’s probably a good buy. However, ultimately, the price of stock is determined by supply and demand. But I digress…

To answer any outstanding questions that I see, Clark:

Yes, companies can survive with negative ROIs. Some for a long long time.

And people invest in companies with ROIs below money market rates all the time. It’s called speculation.

I don’t see where I didn’t answer anything else other than rhetorical questions. Now, kindly defend your expense v. income statement and explain how asset valuation has no impact on ROI. Please don’t give me the mumbo jumbo about manipulation. Remember: honesty is assumed.

So WTF – to use your ancronym.

The day I need any help from you on anything and the day I thank you for anything will be the same day that Bush II gets invited to a Sunni-Shi’ite Celebration of the Invasion of Iraq – in Baghdad.

BTW – Cash is the most easily manipulated financial metrc – just don’t pay your creditors until the first of next month instead of the last of this month.

Major companies do it every month to manipulate their end-of-month reporting.

“You probably don’t realize that ROI uses asset value as part of its calculation. In fact, the most simple explanation of ROI is earnings compared to assets.”

I know how to calculate ROI, I know how to manipulate financial stats if necessary and I know the true value of assets as they relate to ROI.

Like all other business metrics, ROI can be manipulated.

I would LOVE to continue this “debate” but I have to get up early in the morning.

I hope your banker enjoys your disdain for ROI……

Like I said, you likely have no idea how to calculate an ROI.

You said “ROI is the only true measure of a company’s earning capabilities”

Then you said “Business asset value has nothing to do with earning capabilities”

You probably don’t realize that ROI uses asset value as part of its calculation. In fact, the most simple explanation of ROI is earnings compared to assets.

Now, you’ve said that the value of the assets mean nothing to a company’s capability, but ROI is everything. So, the only thing remaning is earnings.

Isn’t that what I said in the beginning? Earnings? I use EBITDA because interest, tax, depreciation and amortization only cloud the issue when measuring operational execution.

Oh yeah – cash. You said “Cash on hand is probably the least valuable measure of a company’s health”

I can have the greatest month in the history of mankind – record sales, record deliveries, record revenue, all kinds of stuff that makes for a very healthy ROI – but if it’s all on AR, then I’ll have very little sympathy from my employees and vendors when I can’t pay them.

The three most valuable words in business: Cash Is King.

You’re welcome. You got a free short-course in finance tonight.

NPV – projected performance.

March 2003 – Iraqi Freedom.

December 2006 – what the hell do we do now?

quote – Golfnutz, business expert.

What the hell does it matter if you have a positive cash balance, a positive EBIT and a negative ROI?

How long do you think you would be in business with a negative ROI?

Basic business…..

I don’t think you know how to calculate an ROI, Clark.

FINANCIAL VALUATION OF A LONG-TERM PROJECT.

Thank you.

I already answered you, Nutz, and I will measure my business skills against your basement blog skills anytime.

BTW – Business asset value has nothing to do with earning capabilities – the value of land and machinery means nothing unless you intend to liquidate the business.

Like someone should liquidate “your business.”

ROI – the here and now.

NPV – what I hope it will be.

ROI – take it to the bank……

I’m patiently waiting.

And, if earnings can be manipulated, so can the ROI. After all, earnings are part of the ROI.

And here’s another one you said: “ROI is the only true measure of a company’s earning capabilities.”

Are you sure you mean “capability?”

Clark, ROI has nothing to do with earning capability. Zero. Zip. None. Nil. Nunca.

Holy Cow where do you come up with this?

that was to have been….

“and my return was (negative 10%)what”

WE Blog doesn’t like negative brackets….