In this video, we'll integrate everything we've learned thus far and bridge from Net Income to Levered Free Cash Flow in Excel.
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What do you guys think of Warren Buffett’s concept of owners earnings? Do you believe owners earnings is a more accurate calculation of free cash flow since it only subtracts maintenance capex from cash from operations and not total capex?
In a perfect world if you had access to a company’s full maintenance vs growth capex figures, would you guys favour using something like owners earnings over levered free cash flow as a more accurate depiction of the cash flows you’re entitled to as a shareholder?
Hi Nathan, Owners’ Earnings is pretty much the same thing as Levered Free Cash Flow. In the calculation of different metrics, analysts have the flexibility to adjust the formula a bit as they see fit. In situations where you think you should subtract maintenance capex instead of total capex, you’re welcome to just do that. The metric’s name doesn’t change.