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Owner Earnings
Owner earnings is a valuation method detailed by Warren Buffett in Berkshire Hathaway's annual report in 1986. He stated that the value of a company is simply the total of the net cash flows (owner earnings) expected to occur over the life of the business, minus any reinvestment of earnings. Buffett defined owner earnings as follows: :"These represent (a) reported earnings plus (b) depreciation, depletion, amortization, and certain other non-cash charges... less (c) the average annual amount of capitalized expenditures for plant and equipment, etc. that the business requires to fully maintain its long-term competitive position and its unit volume... Our owner-earnings equation does not yield the deceptively precise figures provided by GAAP, since (c) must be a guess - and one sometimes very difficult to make. Despite this problem, we consider the owner earnings figure, not the GAAP figure, to be the relevant item for valuation purposes... All of this points up the absurdity of ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Valuation (finance)
In finance, valuation is the process of determining the present value (PV) of an asset. In a business context, it is often the hypothetical price that a third party would pay for a given asset. Valuations can be done on assets (for example, investments in marketable securities such as companies' shares and related rights, business enterprises, or intangible assets such as patents, data and trademarks) or on liabilities (e.g., bonds issued by a company). Valuations are needed for many reasons such as investment analysis, capital budgeting, merger and acquisition transactions, financial reporting, taxable events to determine the proper tax liability. Valuation overview Common terms for the value of an asset or liability are market value, fair value, and Intrinsic value (finance), intrinsic value. The meanings of these terms differ. For instance, when an analyst believes a stock's intrinsic value is greater (or less) than its market price, an analyst makes a "buy" (or "sell") reco ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Fixed Asset
A fixed asset, also known as long-lived assets or property, plant and equipment (PP&E), is a term used in accounting for assets and property that may not easily be converted into cash. Fixed assets are different from current assets, such as cash or bank accounts, because the latter are liquid assets. In most cases, only tangible assets are referred to as fixed. While IAS 16 (International Accounting Standard) does not define the term "Fixed Asset", it is often colloquially considered a synonym for property, plant and equipment. According to IAS 16.6, property, plant and equipment are tangible items that: (a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and (b) are expected to be used during more than one period." Fixed assets are one of two types: * "Freehold Assets" – assets which are purchased with legal right of ownership and used, and * "Leasehold Assets" – assets used by owner without legal ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Management Accounting
In management accounting or managerial accounting, managers use accounting information in decision-making and to assist in the management and performance of their control functions. Definition One simple definition of management accounting is the provision of financial and non-financial decision-making information to managers. In other words, management accounting helps the directors inside an organization to make decisions. This can also be known as Cost Accounting. This is the way toward distinguishing, examining, deciphering and imparting data to supervisors to help accomplish business goals. The information gathered includes all fields of accounting that educates the administration regarding business tasks identifying with the financial expenses and decisions made by the organization. Accountants use plans to measure the overall strategy of operations within the organization. According to the Institute of Management Accountants (IMA), "Management accounting is a profession t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Value Investing
Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. The various forms of value investing derive from the investment philosophy first taught by Benjamin Graham and David Dodd at Columbia Business School in 1928, and subsequently developed in their 1934 text ''Security Analysis''. The early value opportunities identified by Graham and Dodd included stock in public companies trading at discounts to book value or tangible book value, those with high dividend yields, and those having low price-to-earning multiples, or low price-to-book ratios. High-profile proponents of value investing, including Berkshire Hathaway chairman Warren Buffett, have argued that the essence of value investing is buying stocks at less than their intrinsic value. The discount of the market price to the intrinsic value is what Benjamin Graham called the " margin of safety". For the last 25 years, under the influence of ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Cash Flow Forecasting
Cash flow forecasting is the process of obtaining an estimate or forecast of a company's future financial position; the cash flow forecast is typically based on anticipated payments and receivables. See Financial forecast for general discussion re methodology. Function Cash flow forecasting is an important element of financial management generally; Cash flow is the "life-blood" of all businesses — particularly start-ups and small enterprises — and if the business runs out of cash and is not able to obtain new finance, it will become insolvent. As a result, it is essential that management forecast (predict) cash levels. How often, will depend on the financial security of the business: if the business is "struggling", management may assess, if not forecast, cash flow on a daily basis; if the finances are more stable, then this process may be weekly or monthly. Key dependencies re the forecast: * Identify potential shortfalls in cash balances in advance — the cash flo ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Business Valuation
Business valuation is a process and a set of procedures used to estimate the economic value of an owner's interest in a business. Here various valuation techniques are used by financial market participants to determine the price they are willing to pay or receive to effect a sale of the business. In addition to estimating the selling price of a business, the same valuation tools are often used by business appraisers to resolve disputes related to estate and gift taxation, divorce litigation, allocate business purchase price among business assets, establish a formula for estimating the value of partners' ownership interest for buy-sell agreements, and many other business and legal purposes such as in shareholders deadlock, divorce litigation and estate contest. Specialized business valuation credentials include the Chartered Business Valuator (CBV) offered by the CBV Institute, ASA and CEIV from the American Society of Appraisers, and the CVA by the National Association of Certifi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bruce Greenwald
Bruce Corman Norbert Greenwald (born August 15, 1946), is a professor at Columbia University's Graduate School of Business and an advisor at First Eagle Investment Management. He is, among others, the author of the books ''Value Investing: from Graham to Buffett and Beyond'' and ''Competition Demystified: A Radically Simplified Approach to Business Strategy''. He has been referred to by ''The New York Times'' as "a guru to Wall Street's gurus" and is a recognized authority on value investing, along with additional expertise in productivity and the economics of information. Biography Greenwald received a B.S. in electrical engineering from MIT in 1967, a M.S. in electrical engineering and M.P.A. from Princeton University in 1969, and a Ph.D. from MIT in economics in 1978. Before arriving at Columbia in 1991, Greenwald was a research economist at Bell Laboratories and later Bell Communications Research, and an assistant professor at Harvard Business School. Books *''Competiti ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Wall Street
Wall Street is an eight-block-long street in the Financial District of Lower Manhattan in New York City. It runs between Broadway in the west to South Street and the East River in the east. The term "Wall Street" has become a metonym for the financial markets of the United States as a whole, the American financial services industry, New York–based financial interests, or the Financial District itself. Anchored by Wall Street, New York has been described as the world's principal financial center. Wall Street was originally known in Dutch as "de Waalstraat" when it was part of New Amsterdam in the 17th century, though the origins of the name vary. An actual wall existed on the street from 1685 to 1699. During the 17th century, Wall Street was a slave trading marketplace and a securities trading site, and from the early eighteenth century (1703) the location of Federal Hall, New York's first city hall. In the early 19th century, both residences and businesses occupied the a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Generally Accepted Accounting Principles
Publicly traded companies typically are subject to rigorous standards. Small and midsized businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms operate on the cash method of accounting which can often be simple and straight forward. Larger firms most often operate on an accrual basis. Accrual basis is one of the fundamental accounting assumptions and if it is followed by the company while preparing the Financial statements then no further disclosure is required. Accounting standards prescribe in considerable detail what accruals must be made, how the financial statements are to be presented, and what additional disclosures are required. Some important elements that accounting standards cover include: identifying the exact entity which is reporting, discussing any "going concern" questions, specifying monetary units, and reporting time frames. Limitations The notable limitations of accounting ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Capital Expenditure
Capital expenditure or capital expense (capex or CAPEX) is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. It is considered a capital expenditure when the asset is newly purchased or when money is used towards extending the useful life of an existing asset, such as repairing the roof. Capital expenditures contrast with operating expenses (opex), which are ongoing expenses that are inherent to the operation of the asset. Opex includes items like electricity or cleaning. The difference between opex and capex may not be immediately obvious for some expenses; for instance, repaving the parking lot may be thought of inherent to the operation of a shopping mall. The dividing line for items like these is that the expense is considered capex if the financial benefit of the expenditure extends beyond the current fiscal year. Usage Capital expenditures are the funds used to acquire or upgra ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Warren Buffett
Warren Edward Buffett ( ; born August 30, 1930) is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway. He is one of the most successful investors in the world and has a net worth of over $100 billion as of November 2022, making him the world's sixth-wealthiest person. Buffett was born in Omaha, Nebraska. He developed an interest in business and investing in his youth, eventually entering the Wharton School of the University of Pennsylvania in 1947 before transferring to and graduating from the University of Nebraska at 19. He went on to graduate from Columbia Business School, where he molded his investment philosophy around the concept of value investing pioneered by Benjamin Graham. He attended New York Institute of Finance to focus his economics background and soon after began various business partnerships, including one with Graham. He created Buffett Partnership, Ltd in 1956 and his firm eventually acqui ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Amortization (business)
In accounting, amortization refers to expensing the acquisition cost minus the residual value of intangible assets in a systematic manner over their estimated "useful economic lives" so as to reflect their consumption, expiry, and obsolescence, or other decline in value as a result of use or the passage of time. The term amortization can also refer to the completion of that process, as in "the amortization of the tower was expected in 1734". Depreciation is a corresponding concept for tangible assets. Methodologies for allocating amortization to each accounting period are generally the same as these for depreciation. However, many intangible assets such as goodwill or certain brands may be deemed to have an indefinite useful life and are therefore not subject to amortization (although goodwill is subjected to an impairment test every year). While theoretically amortization is used to account for the decreasing value of an intangible asset over its useful life, in practice many ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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