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Warren Buffett's owner earnings calculator

Bridge net income to Buffett-style owner earnings by adding qualifying noncash charges and subtracting maintenance capital and working capital needs.

Warren Buffett at the 2015 SelectUSA Investment Summit Warren Buffett Historical strategy from 1987 Rule located in Berkshire Hathaway, 1987

Portrait: USA International Trade Administration, Public domain, via Wikimedia Commons. Self-hosted by JMM.

Interactive model

Put your numbers through the rule

The source establishes the rule. The values below belong to you, and the output is JMM's deterministic calculation.

Make the assumptions yours

Every field recalculates immediately. Changed values can be copied into a shareable URL.

Owner earnings$1,120m
Per share
$11.20
Owner-earnings yield
11.8%
GAAP-to-owner bridge
-$80m

Maintenance capex and required working capital are analyst inputs, not standardized reported facts.

Inspect the calculationThe same result in a readable record view

Owner-earnings bridge

Net income
$1,200m
Additions
$300m
Deductions
$380m
Source and translation

What the source says, and what the calculator adds

Source-supported ruleBuffett defines owner earnings from reported earnings plus appropriate noncash charges less the capital spending and working capital needed to maintain competitive position and unit volume.
JMM calculationJMM makes every bridge item editable and shows the per-share result, yield, and sensitivity to the maintenance-capex estimate.
Formula and methodOwner earnings = net income + depreciation/amortization + other qualifying noncash charges − maintenance capex − required working-capital increase.
Berkshire Hathaway Feb 27, 19871986 Chairman’s LetterAppendix, “Purchase-Price Accounting Adjustments and the ‘Cash Flow’ Fallacy”
Decision notes

What changes the answer

Maintenance capex is the key judgment

Changing it can materially alter owner earnings. The sensitivity view keeps that estimate visible instead of burying it in a single cash-flow number.

Cash flow and owner earnings answer different questions

Adding every noncash charge without deducting required reinvestment can overstate what owners could safely withdraw.

The right question, built on a number no outsider can actually observe.

Owner earnings asks the only thing that matters about a business: how much cash could leave without the business getting weaker. The concept is sound and it is why Buffett refuses to treat reported cash flow as the answer. The problem is operational. Maintenance capital spending is not a disclosed line anywhere, so the whole calculation pivots on an estimate you make. Move it by 20% on this page and watch the yield move with it. JMM’s view is that owner earnings is a discipline for thinking, not an output to rank companies with, and anyone quoting a precise owner-earnings figure for a business they do not run is quoting their own assumption back to you.

Written by the JMM editor. This is a view, not a recommendation for your circumstances. Who writes this

Not the calculator’s limits. The rule’s.

  1. Growth capex and maintenance capex are not separable from outside

    Companies report one capital expenditure number. Splitting it is judgement, and the split is exactly where an optimistic analyst hides an optimistic conclusion.

  2. The bridge was written for a different kind of business

    The 1986 definition assumes heavy physical assets and depreciation that stands in for real wear. In a software business the maintenance spend is payroll, sits in operating costs, and never appears in the bridge at all.

Limits

What this model does not know

  • Owner earnings is non-GAAP and depends on judgment.
  • Maintenance capital spending is rarely disclosed as a clean fact.
  • The output is not a complete valuation or investment recommendation.
Questions people ask

Before you use the result

Is owner earnings the same as free cash flow?

Not necessarily. Definitions of free cash flow vary, while this page follows the components described in the cited letter.

Where should maintenance capex come from?

It requires company-specific analysis. The calculator deliberately treats it as an input, not a hidden fact.

Take the answer further

The next question this page cannot answer

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