Net income over the life of the company minus all

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net income over the life of the company minus all dividends ever paid Other, consists of amounts that we explain later in the book Contributed capital represents the cash the company received from the sale of stock to stockhold- ers (also called shareholders), less any funds expended for the repurchase of stock. Retained earn- ings (also called earned capital or reinvested capital) represent the cumulative total amount of income that the company has earned and that has been retained in the business and not distributed to shareholders in the form of dividends. The change in retained earnings links consecutive bal-
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Module 1 I Framework for Analysis and Valuation 1·14 I EXHIBIT 1.5 - BERKSHIRE HATHAWAY Statement of Stockholders' Equity Report amounts over a For Year Ended December 31, 2010 period of time Contributed Retained Other Capital Earnings Equity Total Beginning period amounts Statement of Equity ($ millions) December 31, 2009 ........... $27,082 $86,227 $22,476 $135,785 Stock issuance (repurchase) .... 11,096 11,096 Net income (loss) ............. 12,967 527 13,494 Dividends ......... , ......... 0 0 Other ....................... (637) 3,196 2,559 --- December 31, 2010 ........... $37,541 $99,194 $26,199 $162,934 - Change in balances over a period - Ending period amounts ance sheets via the income statement: Ending retained earnings = Beginning retained earnings + _ et income - Dividends. For Berkshire Hathaway, its recent year's retained earnings increases from $86,227 million to $99,194 million. This increase of $12,967 million is explained by its net income of $12,967 million as Berkshire Hathaway paid no dividends in 2010. Statement of Cash Flows The statement of cash flows reports the change (either an increase or a decrease) in a company's cash balance over a period of time. The statement reports on cash inflows and outflows from oper- ating, investing, and financing activities over a period of time. Berkshire Hathaway's statement of cash flows is in Exhibit 1.6. Its cash balance increased by $7,669 million in the recent period: operating activities generated a $17,895 million cash inflow, investing activities reduced cash by 18,277 million, and financing activities yielded a cash inflow of $8,051 million. Berkshire Hathaway's operating cash flow of $17,895 million does not equal its $12,967 mil- lion net income. Generally, a company's net cash flow for a period does not equal its net income for the period. This is due to timing differences between when revenue and expense items are recognized on the income statement and when cash is received and paid. (We discuss this concept further in subsequent modules.) r ____ 0_ --- -- -- EXHIBIT 1.6 BERKSHIRE HATHAWAY Report amounts over Statement of Cash Flows a period of time For Year Ended December 31,2010 Statement of Cash Flows ($ millions) Net cash inflow from operating $17,895 .•••• 1----- (18,277) ~ ========== 8,051* .., I Net cash outflow from investing 7,669 30,558 $38,227 Operating cash flows 0 0 ••• 0 0 •••••••• 0 •••••• Investing cash flows . Financing cash flows .
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