In Berkshire Hathoway Annual Reports Warren Buffet Highlights Financial Tenets

question 52

Multiple Choice

In Berkshire Hathoway annual reports Warren Buffet highlights financial tenets that he believes are important.Which of the following is not a financial tenet of Warren Buffet?

• A) Focus on return on equity (ROE) not earnings per share (EPS).
• B) Calculate owner earnings similar to free cash flow after capital expenditures.
• C) High profit margins relative to the industry.
• D) Company should create at least one dollar of market value for every dollar retained.
• E) All of the above are financial tenets of Warren Buffet.

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Definitions:

Return On Investment

A measure used to evaluate the efficiency of an investment, calculated by dividing the net profit of the investment by its cost.

Operating Assets

Assets that are used for the day-to-day functioning of a business and are expected to generate economic benefits.

Residual Income

The amount of income that an individual or company retains after accounting for all operating expenses and costs, including debt.

Average Operating Assets

The average value of assets used in the daily operation of a business, calculated over a specific period.