Adjusted metrics

An adjusted metric is an argument about what should not count. Ask who benefits from the exclusion.

• Accounting
• Valuation

2 ideas that carry it

• FrameworkAccountingDocumentary

  An adjusted metric is an argument about what should not count

  Judge an adjustment by whether an owner of the whole business would also get to ignore the cost.

  Reading any earnings release, pitch deck or S-1 that leads with a non-GAAP measure.

  From WeWork: Or the Making and Breaking of a $47 Billion Unicorn · 2021

• ArgumentAccountingVideo located

  Stock-based compensation is an operating expense that costs no cash and dilutes you anyway

  Treat stock compensation as a cost of doing business; either deduct it from cash flow or count the dilution, and never ignore it twice.

  Any technology company valuation, any adjusted EBITDA reconciliation, and the interview question about non-cash charges.

  From Session 5: Accounting Inconsistencies · Aswath Damodaran (NYU Stern)