"The definition of intrinsic value is simple: **It is the discounted value of the cash that can be taken out of a business during its remaining life**. "The **cash available for distribution is calculated** by using the following formula: - Cash available for distribution = - (reported earnings + depreciation and other non-cash charges) - - (capitalized expenditures for the business to maintain its operations as is + additional working capital needed) "However, the **only way to measure it properly is by looking at the change in the book value of the business adjusting for dividends or other capital transactions**. "As the change in book value shows only what happened in the past **the best way to approach the analysis of intrinsic value is by combining the following three factors: book value, earnings and expected future return on retained earnings**." ([Location 2664](https://readwise.io/to_kindle?action=open&asin=B07CNFFJ9J&location=2664)) --- **Tags** -- [[quotes]], [[value-investing]], [[intrinsic-value]], [[net-present-value]], [[reported-earnings]], [[depreciation]], [[capitalised-expenditure]], [[working-capital]], [[book-value]], [[dividends]], [[retained-earnings]], [[dividends]], **Source** -- [[202506221723 - LN - Modern Value Investing]]