Carolyn, I will post a more substantive answer to your earlier post on this subject, but I can't ignore your confusion about Ron's statements.
How a company buys things, using cash, its stock or debt is not related directly to what can or must be expensed. Ron does not view bond money as being distinct from any other source of cash. To Ron there is no such thing as bond money. There is just money. All corporate money is fungible. (He can replenish the war chest by banking cash from operations, selling bonds, stock or taking on debt in other ways, but once done, it is just money.)
Routine expenses, cash or not, affect operating earnings. Proper one-time expenses (write-offs) do not bear on operating earnings, although it does affect net earnings. The Street focuses on operating earnings, sometimes to the extent of looking only at EBITDA (earnings before interest, taxes, depreciation and amortization). EBIT (Earnings before interest and taxes) is the most common measure of earnings of interest to the Street. One speaker at an H&Q conference during the peak of the Internet craze referred to EBE. Then he said, "You know, Earnings Before Expenses."
Allen |
