Net Income, Owner Earnings, And Free Cash Flow

Q: What do long term shareholders of a business ultimately care about? A: They care about how much cash they can take out of the business over time. But this may not be accurately reflected in the “Net Income” line at the bottom of the business’s Income Statement. In this episode, we’ll discuss 2 concepts that possibly reflect a business’s economic reality better than Net Income: Owner Earnings and Free Cash Flow. Understanding these concepts can give investors powerful insights into a business’s economic characteristics. This can in turn help investors, (a) identify wonderful businesses, and (b) figure out a good price to pay for them. Disclaimer: This is NOT investment advice. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com