A Nice Investing Tip From Warren Buffett in 1982

In the 1982 Letter to Shareholders of Berkshire Hathaway, Warren Buffett included spent a few paragraphs explaining the accounting realities that come into play based on whether or not you own at least 20% of a company in which you invest. Basically, it works like this: if you own less than 20% of a company, your balance sheet only reflects the dividends that the company pays to you on the balance sheet. If you own more than 20% of the company, your balance sheet reflects both the dividends that the company pays you and the retained earnings that the company keeps.

As Buffett put it in 1982:

 “The appended financial statements reflect “accounting” earnings that generally include our proportionate share of earnings from any underlying business in which our ownership is at least 20%.  Below the 20% ownership figure, however, only our share of dividends paid by the underlying

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