Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Dorothy -

Your point about n/a is excellent. I may do another book, and I will follow your suggestion.

As for dispositions, I treat them as a source of cash. So you have gross capex, gross capex less dispositions, and then net dispositions.

You have to handle dispositions with some care, though. If capex averages $600 million a year, and dispositions $60 million, then just subtract the latter from the former.

But what if the company goes five years with no dispositions, and then in year 6 they reap $4 billion? How would you handle this? The source of cash is so big that it may dominate the defensive income statement. In this scenario I might depreciate dispositions over five years.

While on this subject, I also expense acquisitions. Management could have built the business from scratch, which would require investment in fixed and working capital. Instead, they decided the faster and cheaper route is via acquisition. This is fine. But acquisitions are a capital-equivalent, in mm mind. So I depreciate them over five years, beginning in the year the deal was made.

Good questions, Dorothy. Also, if You go back a year or so in this board you will find a link to an IETC spreadsheet that a reader has generously shared with us. Finally, send me your e-mail address at and I will send you a presentation I gave to Bryant College last spring.

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.