1. Fin 4201/8001 1 Look at each chapter heading and hit the high points Concepts to consider throughout project/presentation Want to bring the class full circle Essays

2. Fin 4201/8001 2 Owner related business principles maximize business value - above average return on capital debt sparingly – what has been history of raising capital Full and fair disclosure Honest and admit mistakes Boards and managers Smaller board is better (<10) Share ownership (vs. options) ≈ vested interest Principled approach to executive pay Compensation tied to performance Corporate Governance What should it look like?

3. Fin 4201/8001 3 Mr. Market Graham – “in the short run the market is voting machine, in long run is a weighing machine.” Skill set where are they making more money? Operations? Debunking standard dogma Diversification only if synergies Risk is possibility of loss or injury Value firm investing Simple and understandable with favorable long term Quality people running business Stable with competitive strength Corporate Finance and Investing

4. Fin 4201/8001 4 Transaction costs hurt market impact Attract right investor Low turnover ≈ not hostage to quarterly results Dollar principle and management returning value repurchases shouldn’t be done just to pump up share price or stem a falling price Common Stock

5. Fin 4201/8001 5 Bad motives Growth for growths sake Most synergies never realized Leveraged buyouts LBOs raise the price of all acquisitions High leverage makes a firm vulnerable Sound acquisition policies Stick to what you know and know with whom you are dealing Mergers and Acquisitions

6. Fin 4201/8001 6 “Look-through earnings” Not GAAP – want to see flow of every dollar Economic vs. Accounting goodwill Growth in intrinsic vs. paid more than fair value “Owner earnings” vs. Cash Flow Cash flow is accounting, need true dollars accruing to investors Intrinsic vs. Book vs. Market value Opinion, accounting concept, and market consensus Accounting & Valuation

7. Fin 4201/8001 7 Options aren’t free “Restructuring” charges ≈ earnings management Segment data – not req’d, but gives better info Deferred taxes ≈ interest free loan Retiree benefits are free either Taxation and investment philosophy Why owning business vs. shares is good BRK pays more than fair share Accounting & Taxes