Whether reported profit is backed by cash, and which adjustments were built to flatter.
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
Profit is an opinion about the future; cash is a fact. When they diverge for long, find out why.
Any question about quality of earnings, accrual accounting or how a fraud can pass an audit.
From Enron: The Smartest Guys in the Room · 2005
A track record with no bad months is a question, not a credential.
Due diligence on any manager, strategy or product that reports steady positive returns.
From Madoff: The Monster of Wall Street · 2023
Read the notes before the numbers; the disclosure that matters is usually there and usually ignored.
Any model review, any quality of earnings exercise, and any short thesis.
From The Signs Were There · Tim Steer