An alternative method for valuing risky cash flows is the Capital Cash Flow (CCF) method. Berkshire Hathaway’s net working capital is the difference between its current assets and current liabilities. Current assets include items such as cash and accounts receivable, while current liabilities include items such as accounts payable (Gitman, 2009). Berkshire would use its working capital for its daily operations.
You can calculate the change in net working capital between two accounting periods to determine its effect on the company’s cash flow. An increase in net working capital reduces a company’s cash flow because the cash cannot be used for other purposes while it is tied up in working capital. A decrease in net working capital would increase Berkshire’s cash flow. Valuation Model That Best Supports Findings The valuation model that best supports the findings is the FCF valuation model.
The reason for this is the calculations consider numerous contributions from the financial statements. The FCF valuation model calculates the Operating cash flow, the common stock price, the NAFI and NACI. All of the equations present valuable information separately but combined together the financial stability of the company is evident. Conclusion The Success of Berkshire Hathaway, Inc. has a lot to do with their market strategies.
Thus far, Berkshire has been successful in seeing an increase in their Revenue and Net Earnings for the past few years, they remain strong and fearless. As we can see from our calculations and outcome Berkshire Hathaway has a strong future ahead. Their numbers are showing promising quarters ahead. There are lessons to be learned, but the fact that Berkshire Hathaway has overcome economic struggles and International successes show that they will be around for years to come.