All: This may be a dumb, easy question, but where would you look (on the financial statements) to determine the capital required to conduct business? I’m reading Berkshire’s Annual Letter and it’s talking about buying businesses that generate profits and that don’t require a large amount of capital to conduct business. Is this an easy figure ($$$) to uncover in the statements?
could be invested capital, could be working capital, etc i’d get this book, THEN read buffetts stuff ---- > http://www.amazon.com/How-Read-Financial-Report-Wringing/dp/0471478679/ref=sr_1_10?ie=UTF8&s=books&qid=1220472424&sr=8-10 also, read the FSA books of CFA level 1 and 2.
talking about Free Cash Flow= CFO - CapEX which is on the cash flow statement.
It’s not dumb. YOu could look at the amount of working capital tied up relative to sales or assets. You could look at ongoing capex or ongoing maintenance capex. The smaller those numbers are, the less capital intensive. Similarly, Buffett has made tons of money buying companies that have excess capital requirements (like insurance companies) and investing that excess capital for excessive returns.
virginCFAhooker Wrote: Buffett has made tons of money buying > companies that have excess capital requirements > (like insurance companies) and investing that > excess capital for excessive returns. negative working cap?
What does negative working cap have to do with it?
mpnoonan Wrote: ------------------------------------------------------- > What does negative working cap have to do with it? i think it is the same as excess working cap? you invest this amt as you are basically financing yourself with stretched payables…walmart and dell used to/currently do it. it was in level 1 materials.
excess would be CA > CL.
mpnoonan Wrote: ------------------------------------------------------- > excess would be CA > CL. ok, so they are different. my bad. i sually just work with “WC” terms and “negative WC.” so i guess i learned something new today. thanks. im gonna go get that buffett book right now actually.
Get the essays of warren buffett. I am in Omaha and see warren every now and again
is this the warren book you are reading? http://www.amazon.com/Essays-Warren-Buffett-Lessons-Corporate/dp/0966446127/ref=pd_bbs_sr_3?ie=UTF8&s=books&qid=1220473814&sr=8-3
yes…its a compilation of his annual reports put together in themes