Berkshire Hathaway
Berkshire Hathaway happens to be one of the best known companies across the world. This is more so the case given that it is led by Warren Buffet, a person who has gained acclaim for his investing prowess. The company is essentially a holding company that mostly invests in other companies via acquisition of their stock. Following an assessment of the most recent SEC filing of the company (i.e. for the financial year ended 31st Dec, 2021), as well as the previous financial years financial statements, the following ratios were computed:
Category
Formula
2021
2020
Liquidity
Current Ratio
Current Assets/Current Liabilities
$148,896M/$46,072M
3.23
$141,832/$45,568M
3.11
Asset Management
Total Asset Turnover Ratio
Total Revenue/Total Assets
$276,094M/$958,784M
0.29
$245,510M/$873,729M
0.28
Financial Leverage
Debt-to-Equity
Total Debt/Total Equity
$114,262M/$514,930M
0.22
$116,895M/$451,336M
0.26
Profitability
Return on Equity
Net Income/Shareholders Equity
$90,807M/$514,930M
0.18
$43,253M/$451,336M
0.10
Market Value
Earnings Per Share
Net Income/Average Outstanding Common Shares
$90,807M/2.256B
$40.25
$43,253M/2.393B
$18.07
Analysis
From the onset, it would be prudent to note that Berkshire Hathaway faces some of the very same challenges being faced by most other businesses in the U.S. This is more so the case in relation to the possibility of a downturn in economic activity as a consequence of the COVID-19 pandemic. A downturn in economic activity would essentially mean that Americans have less disposable income and thus less to spend. This would have a negative impact on the profitability of many of the enterprises in which Berkshire Hathaway has a stake, i.e. the Coca-Cola Company. The company also faces an uncertain future given the ages of Warren Buffet (91) who serves as CEO and Chairman of the Companys Board of Directors, and...
…has not been particularly aggressive in the deployment of debt in efforts to advance its growth agenda. The companys total asset turnover ratio indicates that the firms asset utilization has gotten better over the last two financial years. The seemingly low ratio in this case is typical for a company like Berkshire that has a large asset base. In as far as profitability is concerned, the growth in return on equity indicates that Berkshires shareholders are better off than they were one year ago. If this trend were to continue, it would mean that the company is a viable investment alternative due to its efficiency in profit generation. This assertion is further supported by the 55% increase in EPS over…
References
Berkshire Hathaway (2021). Form 10-K. https://www.berkshirehathaway.com/2021ar/202110-k.pdf
Stampel, J. (2022). Buffett's Berkshire reveals stake in HP; shares surge almost 10%. https://www.reuters.com/business/buffetts-berkshire-hathaway-takes-stake-worth-42-bln-hp-2022-04-07/
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