Quotes About Owner earnings

First, he evaluates a business on its long-term rather than its short-term prospects. Second, he always looks for businesses he understands. (This led him to avoid many Internet-related investments.) And third, when he examines financial statements, he places the greatest emphasis on a measure of cash flow that he calls owner earnings.

EBITDA, as we noted earlier, is no longer Wall Street's favorite measure to watch. Now the hot metric is free cash flow. Some companies have looked at free cash flow for years. Warren Buffett's Berkshire Hathaway is the bestknown example, though Buffett calls it owner earnings. As Buffett's term suggests, it's an important metric for entrepreneurial companies.