Joe Ponzio - Investment Philosophy

Owner Earnings vs. Free Cash Flow

Ponzio emphasizes the difference between Buffett's owner earnings concept and the commonly used free cash flow metric:

"Managers thinking about accounting issues should never forget one of Abraham Lincoln's favorite riddles: 'How many legs does a dog have if you call his tail a leg?' The answer: 'Four, because calling a tail a leg does not make it a leg.'"

Buffett's Owner Earnings Formula:

**Owner Earnings = Reported Earnings + Non-cash Charges - Maint

Summary

FWallStreet.com founder, author of Owner Earnings vs Free Cash Flow analysis

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