Business Quote by Warren Buffett
“Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life. The calculation of intrinsic value, though, is not so simple. As our definition suggests, intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised.”
About This Quote
Source Speech: Shareholder Meeting, Berkshire Hathaway, 1996
Intrinsic value estimates a business’s worth based on future cash flows, adjusted for interest rates and forecasts.
In simple terms: Value is based on future cash flows.
Key Takeaway
Focus on cash flow fundamentals.
Themes
finance
valuation
investment
uncertainty
Mood
analytical
pragmatic
Type
financial
educational
When to use this quote
- Investment analysis
- business planning
- risk assessment
Key Concepts
Discounted cash flow
market assumptions
Questions to Reflect On
- How do you adjust for changing rates?
- What factors most affect cash flow forecasts?
A Different Perspective
Estimates can be inaccurate due to unpredictable markets.
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