@davidflanks: Retained earnings might be the most overlooked line item on the balance sheet. It's one of Buffett's favorites, and once you understand it, you can read a company's entire history of capital allocation in about ten seconds. Every quarter, management makes a choice. Pay profits out to shareholders, or keep them and reinvest in the business. Retained earnings is the running total of that choice. Every dollar the company has ever earned, minus every dollar it paid back out. The entire life of the company, added up in one line. Buffett's rule is simple: every dollar of earnings a company keeps should create at least one dollar of market value for shareholders. If management can't clear that bar, they should hand the money back. What we cover: → Berkshire: never paid a real dividend, retained earnings around $700 billion, sixty years of profits kept and compounded at roughly 20% a year → Sonos: can't even say retained earnings, because they haven't retained any. It's an accumulated deficit, and it went from $50 million to $112 million in the last year alone → Apple: the exact same "accumulated deficit" label, negative $14.3 billion, and it's a good sign. Apple earned $112 billion last year and handed shareholders even more through buybacks and dividends The three questions to ask next time you open a balance sheet: Is retained earnings growing, shrinking, or negative? If it's growing, did the company's value grow at least as fast? If it's shrinking or negative, is it losses, or capital returns? Day 32 of the Flank Challenge. Full write-up: read the breakdown

735

2026-08-15 05:02:06

To see more videos from user @davidflanks, please go to the Tikwm homepage.