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Hi, Fellow Fools

Welcome to the “It's Earnings That Count” Board – Frequently Asked Questions (FAQ's)

written by meddler,
Ver 1.0

1. So, like, what's this board about and stuff?

This board is for the discussion of the investing methodology described in Hewitt Heiserman Jr.'s excellent book "It's Earnings That Count" (IETC).

2. A book you say? I have to read a BOOK? Well, what's the book about then?

From the book's official website:

It's Earnings That Count is your blueprint for finding a great low-risk growth stock. Inspired by the writings of Benjamin Graham (author of The Intelligent Investor and Warren Buffett's mentor), the book shows you how to examine a firm's earnings quality from the perspective of the "defensive" investor who wants to avoid serious mistakes or losses, and the "enterprising" investor who seeks securities that are both sound and more attractive than the average.

3. That sounds like every other investment book. What's so different about it?

I'll quote Motley Fool ex-writer Tom Jacobs here as he puts it better than I would:

"Why is this book unlike any other? Heiserman tried to write what Benjamin Graham might have penned if he were a growth investor. He takes Graham's vital interest in a firm's balance sheet, adds critical information from the cash flow statement and footnotes, and produces two income statements -- what he calls the enterprising income statement and defensive income statement. The result is the only book I've seen geared for buy-to-hold investors that shows how to gauge the quality of a company's earnings from the way both a commercial banker (a defensive investor) and a venture capitalist (an enterprising investor) would look at them.

Graphing the two income statement results over time enables you to see in picture form whether a firm has authentic earnings power for long-term growth. You see how Heiserman's method not only would have tipped investors early to Enron and WorldCom in time to sell, but would have led to identifying Microsoft (Nasdaq: MSFT) and Paychex (Nasdaq: PAYX) in plenty o' time to participate in their growth. The latter two show up clearly as the best companies of quality earnings and growth -- those whose financial statements when graphed show a classic staircase pattern."

More about that at -

4. Sheesh, are you done quoting others? I'm neither a commercial banker nor a venture capitalist, but I'm interested as a Foolish investor. But why do we need a message board for a book?

Because we can! No, seriously, I'm just extending the Foolish tradition "To Enrich Amuse and Educate" so that we can learn from each other's triumphs and tribulations while wading through this soon to-be instant classic. I requested the board to be opened on April 26, 2004. It was opened because this investing strategy was catching on with some other Fools and I figured I might learn from them and encourage others to learn with me.

5. Are there any guidelines to adhere to while posting on this board?

Yes, you have to buy me beer before you can post on this board. No, I'm just kidding! We just ask that you behave as a mature individual, don't behave like a day trader, and respect the opinions of others. Also, it'd suit us all to not get into religious or political diatribes unless it has a material impact on any of the companies we are talking about or the financials thereof. Other than that, it's an informal place. Talk about anything and everything about the book, the author, any errors you find, any modifications you want to propose to the methods described in the book, any companies you want to dissect numerically, et cetra. Don't be too shy or afraid to ask questions if you are stuck. No question is too stupid. Well, okay, don't ask me why the chicken crossed the road and we'll be just fine. I'm no accounting or financial expert in any way and I intend to learn the tools of the trade along with everybody else.

Also, if you intend to post about companies that have been recommended in a subscriber-only service elsewhere (Hidden Gems, Stock Advisor, Income Investor, others), please do not advertise that fact on this board. It is immaterial how you found the company, what matters is the discussion of the company's financials. This is important so that there are no copyright violation issues.

6. Where can I get this book? Is there a specific edition? Does it cost a lot?

Good question. We have an answer for you at -

7. I have read on this board that there are errors in this book. What's up with that?

That's correct. We are making an effort to recognize any errors we notice in the book. Some of the errors and corrections are referenced at -

We will add more to this section as we find more errors. If you find any error, please begin your post with the magic words "IETC Error" and it will save us all time and energy searching for them in the future.

8. Okay, so what companies have you already analyzed on this board?

Some of the companies that were discussed before this board was set-up are mentioned in this post -

The following posts give a good summary on how to go about building the Defensive & Enterprising Income Statements, and the Earnings Power Graph.

Aeropostale (ARO) -

SanDisk (SNDK) -

9. I finally got myself the book and they keep talking about WACC and Cost of Equity. How do I calculate that?

formorears has an interesting explanation for WACC -

Seapickle wrote a post on how to determine Cost of Equity -

10. I notice some of the posts don't print too well. Do you have any recommendations for setting column width while posting?

Larry01Gott has a take on this -

11. What if I have more questions?

Post your question on the board and we will try to do the best we can to help you out.

Fool on,
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