Vinod's Finance Page

Chapter 36: Amortization Charges from the Investor’s Standpoint

Graham notes that the depreciation charge that should be used is that is required to keep the company in operation at a stable earning power i.e. maintenance capital expenditure. While exact knowledge of this is not possible but the analyst should endeavor to develop a rough estimate of the maintenance capital expenditure. Graham’s conception of earning power is equivalent to free cash flow as is currently used.

<< Previous Chapter           TOC         Next Chapter >>