Warren Buffet Accounting

Question 1

How do you calculate free cash flow?

Answer 1

OCF+(CAPEX)

Question 2

What is operating cash flow

Answer 2

cash flow generated from operations or

Net income + Depreciation and Amortisation - AR + AP

Question 3

What is FCF

Answer 3

FCF is the cash flow from operations - Capital expenditures which represent the TRUE free output of the business. It is the money left over to pay interest, dividends and sharebuybacks

Question 4

What is the discount rate?

Answer 4

its is a measure of risk and reflects rate of return you want to receive for a given investment.

Question 5

What is a discount factor?

Answer 5

the discount rate for a given period

Question 6

what is intrinsic value?

Answer 6

The value of business over long term

Question 7

How do calculate DFCF

Answer 7

FCFn/DFn

Question 8

How do you calculate DFn?

Answer 8

(DR+1)n

Question 9

How do you estimate FCF in a equation?

Answer 9

FCFn = BYFCF(1+GR)n

Question 10

How do you calculate DPCF?

Answer 10

BYFCF(1-GR)^11*(1-LGR)^11/DR-LGR * 1/(1+DR)^11

Question 11

limitations of intrinsic value calculator

Answer 11

it only really satisfies for business that fit buffets principles. The model is built on stability and predictability.

Question 12

when to use dcf over intrinsic book value

Answer 12

when there is high earnings growth of ~15%

Question 13

When to use dcf over intrinsic book value

Answer 13

when share buybacks is a large part of their business model or stock splits