What does “Net Depreciation in Fair Value” mean on a financial report?
First, the annual report is just that, a snapshot that shows value at the beginning and end of the period. Beginning = Aug 08 = $105B End =       Aug 09 =  $89B Newsletter date May 10 = $96B Odd they chose end of August as it's not even a calendar quarter end. The $16B was market loss during that period. Nearly half of that seemed to be recovered by the time this newsletter came out. The balance sheet also has to show deposits and payments made to existing retirees. I haven't looked at the S&P numbers for those dates, but my gut says this is right. The market tanked and the plan was down, but not too bad.  Protect? The PBGC guarantees pensions up to a certain limit. I believe that in general, teachers are below the limit and are not at risk of a reduced benefit. You do need to check that your plan is covered. If not, I believe the state would take over directly. I hope this helps.
"To answer your question briefly: net income is affected by many things inside and outside of management control, and must be supplemented by other elements to gain a clear picture of a company's health. To answer your question in-depth, we must look at the history of financial reporting: Initially, accounting was primarily cash-based. That is, a business records a sale when a customer pays them cash, and records expenses when cash goes out the door. This was not a perfectly accurate system, as cashflow might be quite erratic even if sales are stable (collection times may differ, etc.). To combat problems with cash-based accounting, financial reporting moved to an accrual-based system. An accrual is the recording of an item before it has fully completed in a cash transaction. For example, when you ship goods to a customer and they owe you money, you record the revenue - then you record the future collection of cash as a balance sheet item, rather than an income statement item. Another example: if your landlord charges you rent on December 31st for the past year, then in each month leading up to December, you accrue the expense on the income statement, even though you haven't paid the landlord yet. Accrual-based accounting leaves room for accounting manipulation. Enron is a prime example; among other things, they were accruing revenue for sales that had not occurred. This 'accelerated' their income, by having it recorded years before cash was ever collectible. There are specific guidelines that restrict doing things like this, but management will still attempt to accelerate net income as much as possible under accounting guidelines. Public companies have their financial statements audited by unrelated accounting firms - theoretically, they exist to catch material misstatements in the financial statements. Finally, some items impacting profit do not show up in net income - they show up in ""Other Comprehensive Income"" (OCI). OCI is meant to show items that occurred in the year, but were outside of management control. For example, changes in the value of foreign subsidiaries, due to fluctuations in currency exchange rates. Or changes in the value of company pension plan, which are impacted by the stock market. However, while OCI is meant to pick up all non-management-caused items, it is a grey area and may not be 100% representative of this idea. So in theory, net income is meant to represent items within management control. However, given the grey area in accounting interpretation, net income may be 'accelerated', and it also may include some items that occurred by some 'random business fluke' outside of company control. Finally, consider that financial statements are prepared months after the last year-end. So a company may show great profit for 2015 when statements come out in March, but perhaps Jan-March results are terrible. In conclusion, net income is an attempt at giving what you want: an accurate representation of the health of a company in terms of what is under management control. However it may be inaccurate due to various factors, from malfeasance to incompetence.  That's why other financial measures exist - as another way to answer the same question about a company's health, to see if those answers agree. ex: Say net income is $10M this year, but was only $6M last year - great, it went up by $4M! But now assume that Accounts Receivable shows $7M owed to the company at Dec 31, when last year there was only $1M owed to the company. That might imply that there are problems collecting on that additional revenue (perhaps revenue was recorded prematurely, or perhaps they sold to customers who went bankrupt).  Unfortunately there is no single number that you can use to see the whole company - different metrics must be used in conjunction to get a clear picture." There is a positive not being mentioned above: the depreciation vs your regular earned income. Disclaimer: I am not a tax attorney or an accountant, nor do I play one on the internet. I am however a landlord. With that important caveat out of the way: Rental properties (and improvements to them) depreciate in value on a well-defined schedule. You can claim that depreciation as a phantom loss to lower the amount of your taxable regular income. If you make a substantial amount of the latter, it can be a huge boon in the first few years you own the property. You can claim the depreciation as if the property were new. So take the advice of a random stranger on the internet to your accountant/attorney and see how much it helps you. "This is called ""change"" or ""movement"" - the change (in points or percentage) from the last closing value. You can read more about the ticker tape on Investopedia, the format you're referring to comes from there." Could be misunderstanding your context. But ev = equity + debt - cash. So don't think it makes sense for an equity holder to have an individual ev/ebitda different from the company's.   Are you asking in context of valuing equity and debt from an ev/ebitda multiple? You can think of a free cash flow as dividends from operations. FCF = cash from operations - investment in operations. The present value of these cash flows into the future is the value of the firm (DCF is very much like the dividend discount model).   Now why does a DCF produce enterprise value and not equity value? Because a DCF values the firm's operating assets. To find the equity value, you use the accounting relation: assets = liabilities + equity (or in financial terms net operating assets = net financial obligations + common stockholders equity). This means you take away net debt from the value produced by the DCF to find equity.  Now all your excess cash is netted off against your financial obligations (debt) to find the net debt. Cash used for day to day operations is an operating asset and should be treated as such, operating cash should not deducted from value of assets when finding the value of equity.  At least that's what they're teaching at university now (i'm a uni student who's just finished my business valuation subject). "In general, when dealing with quantities like net income that are not restricted to being positive, ""percentage change"" is a problematic measure. Even with small positive values it can be difficult to interpret. For example, compare these two companies: Company A:  Company B:  At a glance, I think most people would come away with the impression that both companies did badly in Y2, but A made a much stronger recovery. The difference between 99.7 and 99.9 looks unimportant compared to the difference between 100,000 and 40,000. But if we translate those to dollars: Company A: Y1 $100m, Y2 $0.1m, Y3 $100.1m Company B: Y1 $100m, Y2 $0.3m, Y3 $120.3m Company B has grown by a net of 20% over two years; Company A by only 1%. If you're lucky enough to know that income will always be positive after Y1 and won't drop too close to zero, then this doesn't matter very much and you can just look at year-on-year growth, leaving Y1 as undefined. If you don't have that guarantee, then you may do better to look for a different and more stable metric,  the other answers are correct: Y1 growth should be left blank. If you don't have that guarantee, then it might be time to look for a more robust measure, e.g. change in net income as a percentage of turnover or of company value." Such activity is normally referred to as bartering income. From the IRS site - You must include in gross income in the year of receipt the fair market value of goods or services received from bartering. Generally, you report this income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or Form 1040, Schedule C-EZ (PDF), Net Profit from Business (Sole Proprietorship). If you failed to report this income, correct your return by filing a Form 1040X (PDF), Amended U.S. Individual Income Tax Return. Refer to Topic 308 and Amended Returns for information on filing an amended return. In the second example you are giving up future  free cash flows in exchange for a capital gain on the original investment. With that respect  the money you will not gain will be the difference of the future cash flows ( net of related costs) minus the net gain on the panel you have sold. The financial result can be considered as the opposite of a sunk cost, that is a cost you have already incurred ( and cannot be recovered)  vs net future gains you are giving up.  In more sophisticated financial terms we are talking about the  benefit-cost ratio:  ( from Investopedia) "From Wikipedia: Usage Because EV is a capital structure-neutral metric, it is useful when   comparing companies with diverse capital structures. Price/earnings   ratios, for example, will be significantly more volatile in companies   that are highly leveraged. Stock market investors use EV/EBITDA to compare returns between   equivalent companies on a risk-adjusted basis. They can then   superimpose their own choice of debt levels. In practice, equity   investors may have difficulty accurately assessing EV if they do not   have access to the market quotations of the company debt. It is not   sufficient to substitute the book value of the debt because a) the   market interest rates may have changed, and b) the market's perception   of the risk of the loan may have changed since the debt was issued.   Remember, the point of EV is to neutralize the different risks, and   costs of different capital structures. Buyers of controlling interests in a business use EV to compare   returns between businesses, as above. They also use the EV valuation   (or a debt free cash free valuation) to determine how much to pay for   the whole entity (not just the equity). They may want to change the   capital structure once in control. Technical considerations Data availability Unlike market capitalization, where both the market price and the   outstanding number of shares in issue are readily available and easy   to find, it is virtually impossible to calculate an EV without making   a number of adjustments to published data, including often subjective   estimations of value: In practice, EV calculations rely on reasonable estimates of the   market value of these components. For example, in many professional   valuations: Avoiding temporal mismatches When using valuation multiples such as EV/EBITDA and EV/EBIT, the   numerator should correspond to the denominator. The EV should,   therefore, correspond to the market value of the assets that were used   to generate the profits in question, excluding assets acquired (and   including assets disposed) during a different financial reporting   period. This requires restating EV for any mergers and acquisitions   (whether paid in cash or equity), significant capital investments or   significant changes in working capital occurring after or during the   reporting period being examined. Ideally, multiples should be   calculated using the market value of the weighted average capital   employed of the company during the comparable financial period. When calculating multiples over different time periods (e.g. historic   multiples vs forward multiples), EV should be adjusted to reflect the   weighted average invested capital of the company in each period. In your question, you stated: The Market Cap is driven by the share price and the share price is   determined by buyers and sellers who have access to data on cash and   debts and factor that into their decision to buy or sell. Note the first point under ""Technical Considerations"" there and you will see that the ""access to data on cash and debts"" isn't quite accurate here so that is worth noting. As for alternatives, there are many other price ratios one could use such as price/earnings, price/book value, price/sales and others depending on how one wants to model the company. The better question is what kind of investing strategy is one wanting to use where there are probably hundreds of strategies at least. Let's take Apple as an example. Back on April 23, 2014 they announced earnings through March 29, 2014 which is nearly a month old when it was announced. Now a month later, one would have to estimate what changes would be made to things there. Thus, getting accurate real-time values isn't realistic. Discounted Cash Flow is another approach one can take of valuing a company in terms of its future earnings computed back to a present day lump sum." The preparation for starting up of the company has lasted already more than 2 years. Let's say the company starts officially in January next year. So, in January 2014... 8 million USD is invested to purchase the equipments and the company will start selling their prdocuts right away. Imagine the company will be selling the same amount of products each year at the same price for 5 years. After 5 years it will sell the equipments for 6 million USD and cease to exist. The depreciation of  equipments is divided into those 5 years. So, each year the depreciation of equipments is 400.000 USD. In despite of this, the company will make 500.000 USD per year as a profit before tax.  So, the equipments are bought in Januardy 2014 (first month of the existence of the company) and sold in December 2018 (last month of the existence of the company). This is the NPV that I calculated. Is it correct? This answer fills in some of the details you are unsure about, since I'm further along than you. I bought the ESPP shares in 2012.  I didn't sell immediately, but in 2015, so I qualify for the long-term capital gains rate. Here's how it was reported: The 15% discount was reported on a W2 as  it was also mentioned twice in the info box (not all of my W2's come with one of these) but also  This showed the sale trade, with my cost basis as the discounted price of $5000. And for interests sake, I also got the following in 2012: WARNING! This means that just going ahead and entering the numbers means you will be taxed twice! once as income and once as capital gains. I only noticed this was happening because I no longer worked for the company, so this W2 only had this one item on it. This is another example of the US tax system baffling me with its blend of obsessive compulsive need for documentation coupled with inexplicably missing information that's critical to sensible accounting. The 1099 documents must (says the IRS since 2015) show the basis value as the award price (your discounted price).   So reading the form 8949: Note: If you checked Box D above but the basis reported to the IRS was   incorrect, enter in column (e) the basis as reported to the IRS, and   enter an adjustment in column (g) to correct the basis. We discover the number is incorrect and must adjust.  The actual value you need to adjust it by may be reported on your 1099, but also may not (I have examples of both). I calculated the required adjustment by looking at the W2, as detailed above. I gleaned this information from the following documents provided by my stock management company (you should the tax resources section of your provider): Does the friend fix your electrical wiring and the engine of your car? If you need a professional advice - ask a professional. In this case - an accountant (not necessarily a CPA, but at least an experienced bookkeeper). Financial Statements (official documents, that is) must be signed by a public accountant (CPA in the US) or the principle (you). I wouldn't take chances and would definitely have an accountant do that. You need to consider the asset useful life, and the depreciation. The fact that you use it for non-business purposes may be recorded in various ways. One that comes to mind is accounting as a supplement for depreciation: You depreciate the percentage that is used for business, and record as a distribution to owner the rest (which is accounting for the personal use). This way it would also match the tax reporting (in the US, at least). Bottom line: if you're preparing an official financial statement (that you're going to submit to anyone other than yourself) - get a professional advice. 83(b) election requires you to pay the current taxes on the discount value. If the discount value is 0 - the taxes are also 0. Question arises - why would someone pay FMV for restricted stocks? That doesn't make sense. I would argue, as a devil's advocate, that the FMV is not really fair market value, since the restriction must have reduced the price you were willing to pay for the stocks. Otherwise why would you buy the stocks at full price - with strings attached that could easily cost you the whole amount you paid? It's a way to help normalize the meaning of the earnings report. Some companies like Google have a small number of publicly traded shares (322 Million). Others like Microsoft have much larger numbers of shares (8.3 Billion). The meaning depends on the stock. If it's a utility company that doesn't really grow, you don't want to see lots of changes -- the earnings per share should be stable. If it's a growth company, earnings should be growing quickly, and flat growth means that the stock is probably going down, especially if slow growth wasn't expected. "Yes - this is exactly what it means.  No losses (negative earnings).   With today's accounting methods, you might want to determine whether you view earnings including or excluding extraordinary items.   For example, a company might take a once-off charge to its earnings when revising the value of a major asset.  This would show in the ""including"" but not in the ""excluding"" figure.   The book actually has a nice discussion in Chapter 12 ""Things to Consider About Per-Share Earnings"" which considers several additional variables to consider here too. Note that this earnings metric is different from ""Stock Selection for the Defensive Investor"" which requires 10 years. PS - My edition (4th edition hardback) doesn't have 386 pages so your reference isn't correct for that edition.  I found it on page 209 in Chapter 15 ""Stock Selection for the Enterprising Investor""."