OWNER EARNINGS / LISTED COMPANIES / FREE TOOL

Listed-company owner-earnings bridge

Reconcile earnings to operating cash, choose a compensation treatment, and test maintenance and working-capital assumptions.

Parts 6–7; Appendix 01 §§A1.1–A1.4 and Appendix 02 SBC methods. Fictional defaults; no company filing is preloaded. Inputs are illustrative assumptions, not live prices or investment recommendations.

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Scenario and units

Scenario / evidence label:

Currency:

Amount and share-count scale:Use the same scale for money and share counts. Money divided by shares then gives currency per share.

Period / valuation date:

Reported statement perimeter

Net income attributable to ordinary owners, after tax and interest:

Depreciation and amortisation already expensed:

SBC already expensed and added back in reported CFO:

Other signed noncash reconciliation adjustments:

Actual operating working-capital cash use:Positive uses cash; a release is negative. Include all relevant operating balances, not just inventory and receivables.

Reported CFO on the same after-tax, after-interest perimeter (optional):Reconcile accounting classifications before entry. A blank comparison remains unavailable, not zero.

Normalization and maintenance

Supported after-tax normalization adjustment:Positive removes a non-recurring expense; negative removes a gain. Do not repeat D&A or SBC.

Normalized required annual operating working-capital increase:

Low maintenance investment estimate:

Base maintenance investment estimate:

High maintenance investment estimate:

Compensation treatment:

Annual replacement cost when replacement treatment is selected:Ignored when keeping the reported expense. Do not also deduct the same compensation cost elsewhere.

Separate uses after the earnings proxy

Additional growth investment, separate from maintenance:

Scheduled debt/lease principal not already in the cash bridge:

Additional retained cash requirement:

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Amber fields are editable. Missing required inputs are not treated as zero. Inputs are used for this response and are not stored in a profile or lead list.

Your scenario, step by step.

Fictional teaching case · Illustrative annual period. Currency: KES; money and shares: million. Prices and per-share results use whole currency units per share. Percentage columns show percentages; discount factors are unitless.

Owner-earnings proxy77

Residual after additional uses67

CFO reconciliation difference0

Reported cash reconstruction

Line	Amount
Reported net income	100
D&A	10
SBC added back in CFO	8
Other noncash adjustments	2
Actual working-capital use	-12
Reconstructed CFO	108
Reported CFO	108
Reported less reconstructed CFO	0

Normalized earnings and separate uses

Line	Amount
Reported net income	100
Supported normalization	0
D&A	10
Other noncash adjustments	2
Net compensation adjustment	0
Normalized working-capital increase	-15
Maintenance	-20
Owner-earnings proxy from earnings	77
Owner-earnings proxy from reported CFO	77
Additional growth investment	-5
Scheduled principal	-3
Additional retention	-2
Residual planning proxy	67

Maintenance sensitivity

Maintenance assumption	Investment	Owner-earnings proxy
Low maintenance	15	82
Base maintenance	20	77
High maintenance	25	72

Interpret the result.

The equity earnings proxy is after reported tax and interest, before the separate growth, principal and reserve uses below. It is not a dated dividend permission or an automatic valuation input.

A working-capital release increases the proxy; assess whether it is recurring. The CFO route replaces actual working capital with normalized requirements once.

R&D already expensed stays in earnings. Any capitalization requires a separate investment/amortisation schedule; it is not added back here.

Formulae and symbol definitions.

\mathrm{CFO}_{\mathrm{recon}}=N+D+S+A-\Delta W_a

Reconstructed CFO = net income + D&A + SBC + other noncash adjustments − actual operating working-capital use.

\mathrm{OE}=N+J+D+A+Q-M-\Delta W_n

Owner earnings = net income + normalization + D&A + other noncash adjustments + compensation adjustment − maintenance − normalized working-capital use.

\mathrm{OE}_{\mathrm{CFO}}=\mathrm{CFO}+\Delta W_a-\Delta W_n+J-K-M

The CFO route reverses actual working-capital use, deducts normalized use, then applies normalization, compensation cost and maintenance.

Symbol	Definition and units
$$N$$ N	Reported ordinary-owner net income after tax and interest, currency units/year.
$$D$$ D	Depreciation and amortisation already expensed, currency units/year.
$$S$$ S	SBC expense added back in CFO, currency units/year.
$$A$$ A	Other signed noncash adjustments, currency units/year.
$$J$$ J	Signed supported after-tax normalization, currency units/year.
$\Delta W_a,\Delta W_n$ ΔWa, ΔWn	Actual and normalized operating working-capital increases. Positive uses cash; negative releases cash.
$$M$$ M	Maintenance investment, currency units/year.
$$Q$$ Q	Zero when retaining SBC expense; SBC minus explicit replacement cost under the replacement method.
$$K$$ K	SBC expense when retaining it, or explicit replacement cost under the replacement method.
$\mathrm{CFO}_{\mathrm{recon}},\mathrm{CFO}$ Reconstructed CFO, CFO	Calculated operating cash and the optional reported comparison, on the same perimeter.
$\mathrm{OE},\mathrm{OE}_{\mathrm{CFO}}$ OE, CFO-based OE	Equity owner-earnings proxies from the two starting points; before separate growth, principal and retention.

Read the research and workbook evidence.

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Existing FCFF/WACC valuation explorer · Detailed workbook library

Method background: Berkshire Hathaway’s 1986 owner-earnings discussion. Filings require accounting interpretation; these tools do not fetch SEC or NSE data automatically.

Symbol	Definition and units
$\(N\)$ N	Reported ordinary-owner net income after tax and interest, currency units/year.
$\(D\)$ D	Depreciation and amortisation already expensed, currency units/year.
$\(S\)$ S	SBC expense added back in CFO, currency units/year.
$\(A\)$ A	Other signed noncash adjustments, currency units/year.
$\(J\)$ J	Signed supported after-tax normalization, currency units/year.
$\Delta W_a,\Delta W_n$ ΔWa, ΔWn	Actual and normalized operating working-capital increases. Positive uses cash; negative releases cash.
$\(M\)$ M	Maintenance investment, currency units/year.
$\(Q\)$ Q	Zero when retaining SBC expense; SBC minus explicit replacement cost under the replacement method.
$\(K\)$ K	SBC expense when retaining it, or explicit replacement cost under the replacement method.
$\mathrm{CFO}_{\mathrm{recon}},\mathrm{CFO}$ Reconstructed CFO, CFO	Calculated operating cash and the optional reported comparison, on the same perimeter.
$\mathrm{OE},\mathrm{OE}_{\mathrm{CFO}}$ OE, CFO-based OE	Equity owner-earnings proxies from the two starting points; before separate growth, principal and retention.