Masters in Business

Aswath Damodaran on the Art of Corporate Valuation

Numbers are helpful in assessing a company’s value. So is narrative.

This week on Masters in Business, we speak with Aswath Damodaran of New York University’s Stern School of Business, the author of 11 books on investing, including the forthcoming “Narrative and Numbers: The Value of Stories in Business.”

He describes the challenges confronting investors trying to objectively assess the valuation of companies, including public ones such as Tesla Motors and Amazon.com and private ones like Uber and Theranos. Damodaran is particularly critical of companies that book good will, an intangible asset representing the premium a buyer pays above fair market value for an asset. He described it as the most destructive accounting item ever created -- it’s how accountants fess up they made a mistake -- and characterized it as a device “used to make up for bad purchase prices.”

He also compares and contrasts corporate leaders like Tesla Chief Executive Officer Elon Musk, whose business narrative is constantly changing, and Amazon CEO Jeff Bezos, who laid out his corporate vision in the mid-1990s and has stayed true to it in the ensuing years.

You can hear the full interview, including our podcast extras at iTunes, SoundCloud and Bloomberg. All of our earlier podcasts can be found at iTunes,  SoundCloud and Bloomberg.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Barry Ritholtz at britholtz3@bloomberg.net

    To contact the editor responsible for this story:
    James Greiff at jgreiff@bloomberg.net

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