Professor Elam

B/W reports that homebuilders are still in a hole.   We have followed this story for you as well as every pundit who has mistakenly thought the worst was over. Well, it’s not. Chapter 11s, high interest loans, off balance sheet debt, and now Moody’s reports that several homebuilders will be in default of their loan covenants soon if things don’t improve. Again, this is why we study accounting. Understanding that a lease or un stated obligation can worsen the real deb/equity ratio helps us understand why firms like this are in so much trouble.  The mastery of accounting can move you from bookkeeping to accounting to analysis, which after all, is what Warren Buffet does best!