Buffett’s concept of economic goodwill vs accounting goodwill
Sunkenness – intangible investments tend to be worth less if they go wrong
economic goodwill
The hunt for wonderful businesses
Free cash flow yield can be a better indicator when return on capital (ROC) becomes a vanity metric that unduly flatters economic performance and management. We can charge management with the full cost of Economic Goodwill.
Be wary of using Return on Capital (ROC)
Superb companies produce a very high return on capital. But when substantial intangible assets don’t show up on balance sheets, the ROC numbers are unduly flattering to management.
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