Warren Buffett and Secrets of Management - 14
One thing that Warren Buffett can't stand in management anywhere, is when they decide to communicate the company's performance based upon Generally Accepted Accounting Principles (GAAP). What these do is hide the performance of a company to the point where the normal outsider can't tell its true condition.
In connection with this, he highly respects managers who are willing to report in complete candor and fully the performance of their company. The GAAP gives opportunity for managers to hide the real health of a company.
How should managers report the performance of a company? According to Buffett, "What needs to be reported, is data - whether GAAP, non-GAAP, or extra GAAP-- that helps the financially literate readers answer three key questions: (1) Approximately how much is this company worth? (2) What is the likelihood that it can meet its future obligations? and (3) How good a job are its managers doing, given the hand they have been dealt?"
The problem has been that accounting standards have required disclosure of business data that only has had to be classified by industry segment. That means that a company can glob every one of the company's businesses under one industry umbrella, making it almost impossible for someone to understand what's really happening in an individual businesses' operations. In other words they can't be measured.
This is one reason why people can't wait for the yearly Berkshire Hathaway (BRK-A) report to come out. It gives an indepth, detailed account of the operations of the Berkshire holdings. There's more honest information there than can possibly gotten anywhere else.
He tries to put out anything he can think of that will help shareholders determine the true condition of every company Berkshire owns or invests in.
Other Buffett Resources:
10 Secrets Hidden in Warren Buffett's Wallet
The Warren Buffett You Don't Know
Warren Buffet-Strategic Planning
Sponsored link: The outsourcing every manager requires - Tampa Locksmith
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