@v587d/capital-generation 2.6.5 → 2.7.0

package/selected-skills/investment-skills/skills/buffett-investment-framework/references/02-business-economics.md

@@ -0,0 +1,188 @@
+# Business Economics and Competitive Position
+
+Use these cards as evidence-bounded analytical prompts derived from Buffett and
+Berkshire writings. Apply them to supplied evidence, preserve each card’s limits, and
+return unresolved findings when prerequisites are missing.
+
+Read this file when mapping the business, testing moat mechanisms, reinvestment, or
+structural change. Load only the cards selected by the router; do not load the whole
+module by default. Abbreviated corroboration citations resolve in the
+[source key](00-source-key.md).
+
+## Card Index
+
+| Card | Decision question |
+| --- | --- |
+| [B01](#b01) | How does a customer dollar become revenue, operating cash, required reinvestment, and distributable owner cash? |
+| [B02](#b02) | What mechanism protects excess returns, and is it widening or eroding? |
+| [B03](#b03) | Do customer behavior, channel position, and realized pricing support durable economics? |
+| [B04](#b04) | Does a non-brand mechanism durably alter delivered cost, customer switching, competitor entry, or network utility? |
+| [B05](#b05) | Will price-taking, excess capacity, and required reinvestment consume apparent earnings or growth? |
+| [B06](#b06) | Can the business deploy material additional capital at attractive normalized returns for long enough to affect owner value? |
+| [B07](#b07) | Is weakness temporary and bounded, or caused by persistent economics that additional effort and capital are unlikely to repair? |
+
+## Complete Cards
+
+<a id="b01"></a>
+
+### B01 — Map How the Business Earns and Converts a Dollar
+
+- **Decision question:** How does a customer dollar become revenue, operating cash,
+  required reinvestment, and distributable owner cash?
+- **Guidance:** Build a causal model from transaction and unit economics through working
+  capital, maintenance, growth funding, and owner cash, then reconcile it to reported
+  totals.
+- **Use when:** Initial analysis, a changed business model, unexplained cash conversion,
+  or a forecast with unclear operating mechanics.
+- **Analytical actions:** Map revenue drivers, unit economics, and costs; trace required
+  and optional reinvestment; reconcile to reported cash and segments.
+- **Output:** A one-page business-model map and dollar-conversion bridge with explicit
+  gaps.
+- **Limits:** A coherent map does not prove durability or value; unresolved segment,
+  unit, or reinvestment data leave the map unresolved.
+- **Source basis:**
+  - **Berkshire Hathaway 2000 annual letter** — *supports*: growth affects value only
+    through cash flow economics.
+  - **Berkshire Hathaway 1977 annual letter** — *illustrates*: See’s capital light
+    earnings growth.
+- **Corroboration:** EWB §V.C; EWB §V.D; OM1996.
+
+<a id="b02"></a>
+
+### B02 — Identify a Causal Moat and Track Its Direction
+
+- **Decision question:** What mechanism protects excess returns, and is it widening or
+  eroding?
+- **Guidance:** Name the mechanism, behavior it changes, and economics it protects;
+  track direction with business-specific evidence rather than labels.
+- **Use when:** A thesis claims durable quality, excess returns, franchise value, or
+  competitive advantage.
+- **Analytical actions:** State the mechanism and protected benefit; describe the
+  strongest plausible attack; track strengthening and erosion indicators.
+- **Output:** A causal moat map with mechanism, protected economics, attack path,
+  indicators, and unresolved links.
+- **Limits:** Reputation, market share, and historical returns do not alone prove a
+  moat.
+- **Source basis:**
+  - **Berkshire Hathaway 2005 annual letter** — *defines*: widening the moat.
+  - **Berkshire Hathaway 1995 annual letter** — *illustrates*: GEICO direct distribution
+    created structural cost advantage.
+- **Corroboration:** BH1981; BH2007; BH2014; LOW ch.3 (GEICO cost-advantage discovery).
+
+<a id="b03"></a>
+
+### B03 — Test Pricing Power, Brand, and Distribution Strength
+
+- **Decision question:** Do customer behavior, channel position, and realized pricing
+  support durable economics?
+- **Guidance:** Treat brand and distribution as mechanisms only when price realization,
+  retention, volume, utility, and channel evidence show a durable behavioral effect.
+- **Use when:** Brand, loyalty, distribution, or pricing power is central to the thesis.
+- **Analytical actions:** Decompose price, volume, mix, retention, and elasticity;
+  examine channels and utility; test inflation, scarcity, and promotion as alternatives.
+- **Output:** A pricing-and-distribution scorecard with mechanism evidence,
+  alternatives, and direction.
+- **Limits:** Price increases can reflect inflation or scarcity; awareness and past
+  margins are insufficient.
+- **Source basis:**
+  - **Berkshire Hathaway 1983 annual letter** — *supports*: consumer franchise and low
+    cost position create goodwill.
+  - **Berkshire Hathaway 1993 annual letter** — *supports*: brands products and
+    distribution create protective moats.
+- **Corroboration:** EWB §V.C; BH2014; BH2023; LOW ch.9 (See’s brand pricing case).
+
+<a id="b04"></a>
+
+### B04 — Test Cost, Scale, Switching, Network, and Efficient-Scale Advantages
+
+- **Decision question:** Does a non-brand mechanism durably alter delivered cost,
+  customer switching, competitor entry, or network utility?
+- **Guidance:** Verify each mechanism through unit-cost, customer, network, or entry
+  evidence; do not infer durability from size alone.
+- **Use when:** A thesis rests on low cost, scale, switching costs, network effects,
+  scarce capacity, or efficient scale.
+- **Analytical actions:** Quantify the claimed difference; test whether rivals can copy
+  or bypass it; track switching, network density, entry, and delivered cost.
+- **Output:** A mechanism-specific advantage table with causal link, rival response,
+  durability, and unresolved evidence.
+- **Limits:** Scale can add complexity, switching can be inertia, networks can reverse,
+  and temporary efficiency is not a moat.
+- **Source basis:**
+  - **Berkshire Hathaway 1995 annual letter** — *illustrates*: GEICO direct distribution
+    created structural cost advantage.
+  - **Berkshire Hathaway 2007 annual letter** — *defines*: enduring economic moat.
+- **Corroboration:** CM50-2015; BH1981; BH2014.
+
+<a id="b05"></a>
+
+### B05 — Distinguish a Franchise from a Commodity or Capital Trap
+
+- **Decision question:** Will price-taking, excess capacity, and required reinvestment
+  consume apparent earnings or growth?
+- **Guidance:** Diagnose whether returns come from differentiated value or favorable
+  cycle and price while replacement and competitive capital absorb owner cash.
+- **Use when:** Commodity, manufacturing, transport, capital-intensive, or rapidly
+  growing businesses with volatile prices or persistent reinvestment.
+- **Analytical actions:** Measure replacement capital, working capital, utilization, and
+  incremental returns; test price-taking and capacity; identify low-cost or regulated
+  exceptions.
+- **Output:** A franchise-versus-capital-trap diagnosis with capital burden, industry
+  mechanism, exceptions, and unresolved data.
+- **Limits:** A low-cost producer or fairly regulated asset can be viable; one weak
+  cycle does not establish a trap.
+- **Source basis:**
+  - **Berkshire Hathaway 1978 annual letter** — *supports*: commodity capital intensity
+    depresses returns.
+  - **Berkshire Hathaway 1982 annual letter** — *supports*: commodity overcapacity
+    drives poor profitability.
+- **Corroboration:** EWB §I.C; OM1996; BH1981; BH2023.
+
+<a id="b06"></a>
+
+### B06 — Judge the Reinvestment Runway from Normalized Capital Returns
+
+- **Decision question:** Can the business deploy material additional capital at
+  attractive normalized returns for long enough to affect owner value?
+- **Guidance:** Separate returns on required from incremental capital, then test the
+  scale, duration, funding, and durability of the prospective runway.
+- **Use when:** Growth valuation, retained-earnings analysis, or a quality claim based
+  on historical returns.
+- **Analytical actions:** Measure normalized unleveraged returns; estimate deployable
+  capital and funding; stress return decay with scale and competition.
+- **Output:** A reinvestment-runway schedule showing return evidence, deployable
+  capital, duration, decay assumptions, and unresolved bounds.
+- **Limits:** Historical returns do not prove future opportunity; neither reinvestment
+  nor distribution alone establishes security value.
+- **Source basis:**
+  - **Berkshire Hathaway 1992 annual letter** — *supports*: best and worst businesses by
+    incremental capital returns.
+  - **Berkshire Hathaway 2007 annual letter** — *qualifies*: scale prevents repetition
+    of Berkshire past returns.
+- **Corroboration:** EWB §III.C; OM1996; BH2014; BH2023.
+
+<a id="b07"></a>
+
+### B07 — Separate Cyclical Setbacks from Structural or Turnaround Traps
+
+- **Decision question:** Is weakness temporary and bounded, or caused by persistent
+  economics that additional effort and capital are unlikely to repair?
+- **Guidance:** Identify the causal problem and require evidence that it is discrete,
+  financeable, and repairable before calling it cyclical or a turnaround.
+- **Use when:** Depressed earnings, apparent cheapness, restructuring, turnaround
+  claims, or repeated capital demands.
+- **Analytical actions:** Separate cycle, execution, and structural mechanisms; compare
+  prior cycles and peers; define repair conditions, capital, and failure indicators.
+- **Output:** A cyclical-versus-structural diagnosis with causal evidence, repair test,
+  capital requirement, and unresolved classification.
+- **Limits:** Poor historical economics are not immutable and exceptional management can
+  improve a mediocre business.
+- **Source basis:**
+  - **Berkshire Hathaway 1979 annual letter** — *illustrates*: Waumbec cheap turnaround
+    failed.
+  - **Berkshire Hathaway 1988 annual letter** — *qualifies*: exceptional management can
+    overcome mediocre industry economics.
+- **Corroboration:** EWB §II.F; OM1996; BH2014; FL2025.
+
+<!-- This document follows common-doc-guidelines.md.
+See github.com/jlevy/practical-prose and review guidelines before editing.
+-->

package/selected-skills/investment-skills/skills/buffett-investment-framework/references/03-management-governance.md

@@ -0,0 +1,213 @@
+# Management, Governance, and Culture
+
+Use these cards as evidence-bounded analytical prompts derived from Buffett and
+Berkshire writings. Apply them to supplied evidence, preserve each card’s limits, and
+return unresolved findings when prerequisites are missing.
+
+Read this file when testing conduct, operating contribution, incentives, controls,
+governance, or succession.
+Load only the cards selected by the router; do not load the whole module by default.
+Abbreviated corroboration citations resolve in the [source key](00-source-key.md).
+
+## Card Index
+
+| Card | Decision question |
+| --- | --- |
+| [M01](#m01) | Does management demonstrate integrity and candor when disclosure or restraint is personally costly? |
+| [M02](#m02) | How much performance reflects execution rather than inherited economics, industry conditions, leverage, or tailwinds? |
+| [M03](#m03) | Has management converted retained and redeployed resources into superior long-term per-share owner value? |
+| [M04](#m04) | What behavior do pay, ownership, shared downside, spending, and reporting arrangements actually reward? |
+| [M05](#m05) | Which behaviors does the organization repeatedly attract, reward, normalize, and reproduce? |
+| [M06](#m06) | Does authority sit with capable operators while audit, compliance, escalation, and capital control remain effective? |
+| [M07](#m07) | Can the board understand, challenge, and act against management when owner interests require it? |
+| [M08](#m08) | Can leadership, operating, investment, and control roles transfer without losing capability or fair treatment? |
+
+## Complete Cards
+
+<a id="m01"></a>
+
+### M01 — Evaluate Integrity and Candor Without Letting Likability Substitute for Evidence
+
+- **Decision question:** Does management demonstrate integrity and candor when
+  disclosure or restraint is personally costly?
+- **Guidance:** Treat character separately from performance and give more weight to
+  timely bad news, honest postmortems, fair treatment, and costly restraint than
+  reputation or charisma.
+- **Use when:** Trustworthiness, disclosure quality, related-party conduct, or a thesis
+  dependent on managerial character.
+- **Analytical actions:** Compare favorable and adverse-period communications; identify
+  costly choices; separate conduct from operating and allocation results.
+- **Output:** A conduct ledger with supported, adverse, and unresolved observations by
+  period.
+- **Limits:** Character is partly unobservable and vulnerable to halo and hindsight;
+  candor never replaces controls.
+- **Source basis:**
+  - **Berkshire Hathaway 2024 annual letter** — *supports*: managerial candor is a
+    governance signal.
+  - **Berkshire Hathaway 1989 annual letter** — *qualifies*: admirable managers are
+    necessary but not sufficient.
+- **Corroboration:** EWB §II.F; BPL1969; OM1996; BH2002.
+
+<a id="m02"></a>
+
+### M02 — Judge Operating Competence in Economic Context
+
+- **Decision question:** How much performance reflects execution rather than inherited
+  economics, industry conditions, leverage, or tailwinds?
+- **Guidance:** Assess execution against the opportunity set and constraints management
+  faced; do not infer competence solely from outcomes.
+- **Use when:** Comparing managers across periods, peers, cycles, or businesses with
+  materially different economics.
+- **Analytical actions:** Reconcile operating drivers with external conditions; compare
+  controllable outcomes; separate execution from allocation and character.
+- **Output:** A contextual performance bridge identifying controllable contribution,
+  external effects, and unresolved attribution.
+- **Limits:** Counterfactual performance is unobservable and peer sets may be poor;
+  leave attribution unresolved when causes cannot be separated.
+- **Source basis:**
+  - **Berkshire Hathaway 2007 annual letter** — *supports*: select managers for brains
+    passion and integrity.
+  - **Berkshire Hathaway 1989 annual letter** — *qualifies*: admirable managers are
+    necessary but not sufficient.
+- **Corroboration:** EWB §I.E; CM50-2015; BH2014.
+
+<a id="m03"></a>
+
+### M03 — Judge Capital-Allocation Skill Separately from Operations
+
+- **Decision question:** Has management converted retained and redeployed resources into
+  superior long-term per-share owner value?
+- **Guidance:** Evaluate allocation separately from operations and compare material uses
+  with contemporaneous alternatives using per-share economics.
+- **Use when:** Retention, acquisitions, securities, debt changes, repurchases,
+  distributions, or inaction materially affects the thesis.
+- **Analytical actions:** Reconstruct decisions and alternatives; compare expected and
+  realized per-share economics; conduct postmortems without hindsight substitution.
+- **Output:** A dated allocation scorecard with amount, channel, rationale,
+  alternatives, outcome, and unresolved counterfactual.
+- **Limits:** Outcomes do not fully reveal decision quality and one successful decision
+  does not establish future skill.
+- **Source basis:**
+  - **Berkshire Hathaway 2021 annual letter** — *implements*: compare capital allocation
+    routes by return and scale.
+  - **Berkshire Hathaway 1994 annual letter** — *supports*: allocate capital by per
+    share intrinsic value not near term EPS.
+- **Corroboration:** CM50-2015; OM1996; BH2014.
+
+<a id="m04"></a>
+
+### M04 — Inspect Incentives, Ownership Alignment, and Owner Treatment
+
+- **Decision question:** What behavior do pay, ownership, shared downside, spending, and
+  reporting arrangements actually reward?
+- **Guidance:** Map incentives to controllable risk-adjusted value and test
+  owner-alignment claims through conduct, exposure, and fair treatment.
+- **Use when:** Compensation, control, related parties, dilution, discretionary
+  spending, or minority-owner treatment is material.
+- **Analytical actions:** Decompose pay and ownership; test charges for capital and
+  risk; compare stated alignment with dilution, spending, disclosure, and treatment.
+- **Output:** An incentive-and-alignment map linking mechanisms to rewarded behavior,
+  owner consequences, and conflicts.
+- **Limits:** Concentrated ownership can create control risk and no pay formula fits
+  every role; opaque exposure leaves alignment unresolved.
+- **Source basis:**
+  - **Berkshire Hathaway 1994 annual letter** — *implements*: tie manager pay to
+    controllable operating results.
+  - **Berkshire Hathaway 2003 annual letter** — *qualifies*: material owner alignment
+    supports director independence but does not guarantee it.
+- **Corroboration:** EWB §I.E; OM1996; FL2025.
+
+<a id="m05"></a>
+
+### M05 — Test Culture and the Institutional Imperative Through Behavior
+
+- **Decision question:** Which behaviors does the organization repeatedly attract,
+  reward, normalize, and reproduce?
+- **Guidance:** Treat culture as a system expressed through hiring, incentives,
+  forecasts, costs, imitation, and reactions to mistakes—not declared values.
+- **Use when:** A thesis depends on durable organizational behavior, acquisition
+  appetite, cost discipline, forecasting, or decentralization.
+- **Analytical actions:** Identify repeated behaviors; trace reinforcing mechanisms;
+  search for actions contradicting the declared culture.
+- **Output:** A culture-mechanism map with reinforcing behaviors, contradictions, and
+  change indicators.
+- **Limits:** Culture is neither automatic nor irreversible; leave durability unresolved
+  when evidence is anecdotal or leader dependent.
+- **Source basis:**
+  - **Berkshire Hathaway 1989 annual letter** — *defines*: institutional imperative.
+  - **Berkshire Hathaway 2000 annual letter** — *supports*: long term growth forecasts
+    can corrupt managerial behavior.
+- **Corroboration:** EWB §II.F; BH2002; BH2014.
+
+<a id="m06"></a>
+
+### M06 — Assess Decentralization, Controls, and Bad-News Flow
+
+- **Decision question:** Does authority sit with capable operators while audit,
+  compliance, escalation, and capital control remain effective?
+- **Guidance:** Evaluate autonomy and control together; decentralization requires
+  capable managers, protected escalation, and explicit retained controls.
+- **Use when:** Decentralized groups, holding companies, autonomous subsidiaries, or
+  multilayer information flow.
+- **Analytical actions:** Map delegated and retained authorities; test audit,
+  compliance, whistleblower, and bad-news channels; review detection and correction of
+  errors.
+- **Output:** An authority-and-control matrix with escalation paths, failure examples,
+  and unresolved dependencies.
+- **Limits:** Centralization can also fail and visible mistakes may be an accepted cost;
+  absent incident evidence leaves control quality unresolved.
+- **Source basis:**
+  - **Berkshire Hathaway 1991 annual letter** — *implements*: decentralize operations
+    centralize capital allocation.
+  - **Berkshire Hathaway 2004 annual letter** — *qualifies*: decentralized companies
+    need protected whistleblower channel.
+- **Corroboration:** CM50-2015; OM1996; LOW ch.15 (two-level control structure).
+
+<a id="m07"></a>
+
+### M07 — Test Substantive Board Independence and Power
+
+- **Decision question:** Can the board understand, challenge, and act against management
+  when owner interests require it?
+- **Guidance:** Judge independence by competence, economic independence, information,
+  deliberation, and willingness to oppose or replace management—not formal labels.
+- **Use when:** Board oversight, CEO power, deals, compensation, conflicts, or
+  controlling ownership affects the thesis.
+- **Analytical actions:** Map skills, ties, information, and voting power; inspect
+  dissent mechanisms; review behavior during conflicts or underperformance.
+- **Output:** A board-power assessment separating formal status from demonstrated
+  capability and action.
+- **Limits:** Ownership and private sessions do not create judgment; unobservable
+  conflict behavior leaves independence unresolved.
+- **Source basis:**
+  - **Berkshire Hathaway 2003 annual letter** — *supports*: business savvy is
+    indispensable for corporate directors.
+  - **Berkshire Hathaway 2019 annual letter** — *implements*: boards should hear
+    informed opposition to acquisitions.
+- **Corroboration:** EWB §I.B; BH2014; FL2025.
+
+<a id="m08"></a>
+
+### M08 — Assess Role-Specific Succession and Control Continuity
+
+- **Decision question:** Can leadership, operating, investment, and control roles
+  transfer without losing capability or fair treatment?
+- **Guidance:** Assess succession by role, horizon, emergency readiness, delegated
+  experience, and control-transfer mechanics; a name is not proof.
+- **Use when:** Key-person dependence, controlling ownership, aging leadership, estate
+  plans, voting arrangements, or role concentration.
+- **Analytical actions:** Separate role successions; inspect emergency and long-term
+  plans and staged responsibility; map voting, estate, and sale mechanics.
+- **Output:** A role-specific continuity map with successor evidence, control
+  transitions, triggers, and unresolved dependencies.
+- **Limits:** Private plans may remain undisclosed and legal or tax mechanics can
+  change; names or assurances alone leave readiness unresolved.
+- **Source basis:**
+  - **Berkshire Hathaway 2005 annual letter** — *defines*: succession role separation.
+  - **Berkshire Hathaway 2010 annual letter** — *implements*: document emergency
+    successors with strengths and weaknesses.
+- **Corroboration:** CM50-2015; BH2014; FL2025.
+
+<!-- This document follows common-doc-guidelines.md.
+See github.com/jlevy/practical-prose and review guidelines before editing.
+-->

package/selected-skills/investment-skills/skills/buffett-investment-framework/references/04-financial-reality.md

@@ -0,0 +1,192 @@
+# Financial Reality and Owner Economics
+
+Use these cards as evidence-bounded analytical prompts derived from Buffett and
+Berkshire writings. Apply them to supplied evidence, preserve each card’s limits, and
+return unresolved findings when prerequisites are missing.
+
+Read this file when reconciling filings, owner earnings, segments, capital returns, or
+obligations. Load only the cards selected by the router; do not load the whole module by
+default. Abbreviated corroboration citations resolve in the
+[source key](00-source-key.md).
+
+## Card Index
+
+| Card | Decision question |
+| --- | --- |
+| [F01](#f01) | What ownership, cash-flow, and obligation economics lie behind the reported result? |
+| [F02](#f02) | How much cash can owners remove without weakening competitive position or unit volume? |
+| [F03](#f03) | Which capital preserves economics, funds growth, remains trapped, or is actually distributable? |
+| [F04](#f04) | What economics accrue through minority interests, segments, and holding structures despite reported presentation? |
+| [F05](#f05) | What recurring earning power belongs to each distinct business across a representative period? |
+| [F06](#f06) | What normalized unleveraged returns does the business earn on required tangible capital, and what has additional capital produced? |
+| [F07](#f07) | What disclosed or implied claims could absorb cash materially beyond reported earnings or liabilities? |
+
+## Complete Cards
+
+<a id="f01"></a>
+
+### F01 — Reconstruct Economic Substance from Accounting
+
+- **Decision question:** What ownership, cash-flow, and obligation economics lie behind
+  the reported result?
+- **Guidance:** Begin with audited figures and reconcile every adjustment back to them;
+  accounting rules are inputs, not permission to discard costs.
+- **Use when:** Accounting form, rule changes, acquisition accounting, noncash charges,
+  consolidation, or management metrics may obscure economics.
+- **Analytical actions:** Inventory policies and changes; reconcile totals to the
+  analytical view; explain the economic reason for every adjustment.
+- **Output:** A reported-to-economic bridge with source, amount, rationale, and
+  unresolved items for each adjustment.
+- **Limits:** Adjustments can introduce bias and false precision; unsupported
+  substitutions or an unreconciled bridge remain unresolved.
+- **Source basis:**
+  - **Berkshire Hathaway 1982 annual letter** — *supports*: accounting numbers begin not
+    end valuation.
+  - **Berkshire Hathaway 2001 annual letter** — *illustrates*: goodwill rule change
+    raises reported not economic earnings.
+- **Corroboration:** EWB §V.B; EWB §V.D; OM1996; BH2014.
+
+<a id="f02"></a>
+
+### F02 — Estimate Owner Earnings After All Real Costs
+
+- **Decision question:** How much cash can owners remove without weakening competitive
+  position or unit volume?
+- **Guidance:** Restore noncash charges only when they are not economic depletion and
+  subtract maintenance capital, required working capital, compensation, and recurring
+  costs; use supported ranges.
+- **Use when:** Cash removability or distributable earning power matters to valuation,
+  reinvestment, or payout analysis.
+- **Analytical actions:** Show every adjustment; estimate maintenance capital and
+  working capital across a representative period; sensitize judgmental components.
+- **Output:** A reconciled owner-earnings range with assumptions, sensitivities, and
+  blocked components.
+- **Limits:** Maintenance and growth overlap and depreciation or amortization may
+  misstate depletion; unbounded material needs leave the result unresolved.
+- **Source basis:**
+  - **Berkshire Hathaway 1986 annual letter** — *defines*: owner earnings.
+  - **Berkshire Hathaway 2000 annual letter** — *supports*: depreciation represents real
+    maintenance capital cost.
+- **Corroboration:** EWB §V.D; BH2002; BH2014; BH2023.
+
+<a id="f03"></a>
+
+### F03 — Separate Maintenance, Growth, Restricted, and Distributable Capital
+
+- **Decision question:** Which capital preserves economics, funds growth, remains
+  trapped, or is actually distributable?
+- **Guidance:** Classify capital by economic function before treating cash flow as owner
+  value; required, catch-up, restricted, or low-return reinvestment is not freely
+  distributable.
+- **Use when:** Capital-intensive, regulated, cyclical, rapidly growing, or structurally
+  restricted businesses.
+- **Analytical actions:** Classify spending and working capital; reconcile restrictions
+  and reserves; test whether claimed growth spending only preserves economics.
+- **Output:** A schedule of maintenance, growth, catch-up, restricted, and distributable
+  amounts or ranges.
+- **Limits:** Categories overlap and management labels may be unreliable; unbounded
+  maintenance or restrictions leave distributability unresolved.
+- **Source basis:**
+  - **Berkshire Hathaway 1986 annual letter** — *defines*: owner earnings.
+  - **Berkshire Hathaway 2007 annual letter** — *qualifies*: rapid growth low return
+    capital hunger is worst business model.
+- **Corroboration:** EWB §V.C; OM1996; BH2023.
+
+<a id="f04"></a>
+
+### F04 — Look Through Partial Ownership, Segments, and Holding Structures
+
+- **Decision question:** What economics accrue through minority interests, segments, and
+  holding structures despite reported presentation?
+- **Guidance:** Attribute relevant results to distinct businesses and interests,
+  reconcile to reported totals, and credit retained investee earnings only with
+  dilution, tax, and productive-deployment evidence.
+- **Use when:** Minority holdings, conglomerates, equity-method interests, or materially
+  different segments.
+- **Analytical actions:** Map ownership and segments; calculate look-through economics,
+  taxes, and dilution; reconcile to consolidated reporting.
+- **Output:** A look-through and segment schedule with ownership, reported treatment,
+  economic attribution, and differences.
+- **Limits:** Retention can destroy value and segment definitions can obscure economics;
+  inadequate data leaves attribution unresolved.
+- **Source basis:**
+  - **Berkshire Hathaway 1997 annual letter** — *defines*: look through earnings.
+  - **Berkshire Hathaway 1985 annual letter** — *supports*: segment data essential for
+    multiline business analysis.
+- **Corroboration:** EWB §V.B; EWB §V.F; OM1996; BH2014.
+
+<a id="f05"></a>
+
+### F05 — Build a Reconciled Normalized Earning-Power Base
+
+- **Decision question:** What recurring earning power belongs to each distinct business
+  across a representative period?
+- **Guidance:** Bridge unusual, market-driven, cyclical, and acquisition effects without
+  erasing genuine costs; preserve reconciliation and period.
+- **Use when:** Before valuation or comparison when results contain cycles, unusual
+  items, marks, acquisitions, or heterogeneous segments.
+- **Analytical actions:** Reconcile by segment and period; classify adjustments; produce
+  base and adverse normalized ranges.
+- **Output:** A normalized earning-power bridge by segment, period, and adjustment with
+  reconciled totals.
+- **Limits:** Normalization can cherry-pick and structural change can make history
+  unrepresentative; an unbounded cycle leaves the base unresolved.
+- **Source basis:**
+  - **Berkshire Hathaway 1983 annual letter** — *implements*: separate operating
+    earnings from unusual gains.
+  - **Berkshire Hathaway 2003 annual letter** — *implements*: analyze diversified
+    enterprises by economic segment and through time.
+- **Corroboration:** BH2014; BH2022.
+
+<a id="f06"></a>
+
+### F06 — Measure Returns on Tangible and Incremental Capital
+
+- **Decision question:** What normalized unleveraged returns does the business earn on
+  required tangible capital, and what has additional capital produced?
+- **Guidance:** Measure historical tangible and incremental returns independently of
+  leverage and acquisition premiums; keep measurement separate from prospective
+  durability and value.
+- **Use when:** Business quality, reinvestment, growth value, or capital intensity is
+  material.
+- **Analytical actions:** Reconcile operating profit and tangible capital; calculate
+  incremental returns over defensible intervals; separate organic investment,
+  acquisitions, leverage, and goodwill.
+- **Output:** A historical return schedule with denominators, intervals, adjustments,
+  and sensitivities.
+- **Limits:** Denominators and lags are judgmental and historical returns may not
+  persist; an indefensible bridge remains unresolved.
+- **Source basis:**
+  - **Berkshire Hathaway 1992 annual letter** — *supports*: best and worst businesses by
+    incremental capital returns.
+  - **Berkshire Hathaway 2013 annual letter** — *supports*: returns on unleveraged net
+    tangible assets reveal business economics.
+- **Corroboration:** EWB §V.C; OM1996; BH2014; LOW ch.20 (USAir capital-intensity case).
+
+<a id="f07"></a>
+
+### F07 — Reconcile Cash Conversion and Hidden or Long-Duration Obligations
+
+- **Decision question:** What disclosed or implied claims could absorb cash materially
+  beyond reported earnings or liabilities?
+- **Guidance:** Reconcile cash conversion and inventory debt, reserves, pensions,
+  derivatives, collateral, guarantees, and uncertain promises by amount, timing, range,
+  and liquidity demand.
+- **Use when:** Accruals, long-tail claims, pensions, derivatives, guarantees,
+  collateral, or refinancing obligations are material.
+- **Analytical actions:** Build a cash bridge; inventory obligations and timing;
+  reconcile reported amounts to ranges and assumptions.
+- **Output:** An obligation ledger with amount or range, timing, model dependence, cash
+  trigger, and unresolved exposure.
+- **Limits:** Product mechanics matter and terminal cash can differ from interim marks;
+  do not invent absent ranges.
+- **Source basis:**
+  - **Berkshire Hathaway 1992 annual letter** — *supports*: cash accounting can conceal
+    growing future liabilities.
+  - **Berkshire Hathaway 2003 annual letter** — *qualifies*: derivatives company
+    disclosures cannot reveal the full risk.
+- **Corroboration:** EWB §V.H; BH2002.
+
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