Identifying Red Flags: Earnings Quality Adjustments

14 Jul 2014 · 1 min

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David Trainer shows how to convert GAAP earnings into economic earnings using the GE model in NuConstructs. The tutorial walks through the Financials and Metrics tab and Adjustments page to calculate NOPAT and invested capital, revealing what percentage of revenue and net assets the adjustments actually affect.

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Welcome to the NuConstructs tutorial for identifying red flags, earnings quality adjustments. This tutorial is concerned with the adjustments we make to convert GAAP data into economic earnings. Here we have the model for GE. We'll need to access the Financials and Metrics tab to find the adjustments. The Adjustments page provides a detailed breakout of the adjustments we make to arrive at NOPAT and invested capital. It also shows the percentage impact the adjustments have on revenue for NOPAT and net assets for invested capital. Thank you for watching this tutorial. Please leave us a comment if you have any questions.