Owner Earnings = Net Income + Depreciation & Amortization + Other non-cash charges - Maintenance Capex (+/- working capital change)
Owner earnings approximate the cash a business could pay out without shrinking.
What it is
Owner earnings is a cash-based measure of profit defined by Warren Buffett: reported net income, plus non-cash charges like depreciation, minus the capital spending the business genuinely needs to maintain its competitive position. It tries to capture the cash a business actually throws off to its owner, rather than accounting profit. It is conceptually close to free cash flow but emphasizes maintenance capital spending.
Why it matters
Reported earnings can be distorted by non-cash items and aggressive accounting, while owner earnings focuses on durable, distributable cash. Using it as the basis for valuation guards against paying for profits that never become real cash.
How it's calculated
Start with net income, add back depreciation, amortization, and other non-cash charges, then subtract the maintenance portion of capital expenditures (and adjust for working-capital needs). The maintenance-capex figure is a judgment call, which is the measure's main source of imprecision.
How Quintarthai uses it
The income-statement and cash-flow detail needed to build owner earnings — net income, D&A, and capital spending — is on each company's Financials tab.
Cross-border note. The calculation works the same under US GAAP and Canadian IFRS, but be aware IFRS allows some cost capitalization (such as certain development costs) that GAAP expenses, which can shift where the cash shows up.
FAQ
How is owner earnings different from free cash flow?
They are very similar. The key distinction is that owner earnings subtracts only maintenance capex — the spending needed to sustain the business — whereas standard free cash flow subtracts all capex, including growth investment.
Why is maintenance capex hard to pin down?
Companies report total capital spending but rarely split it into maintenance versus growth. Estimating the maintenance share requires judgment, which is the least precise part of the calculation.
Check your understanding
How does owner earnings differ from standard free cash flow?
Owner earnings subtracts only the maintenance portion of capital spending needed to sustain the business, whereas standard free cash flow subtracts all capex including growth investment.