8-KOther Events

BERKSHIRE HATHAWAY INC 8-K Report, Corporate Update (Jan 24, 2012)

Filed January 24, 2012For Securities:BRK-BBRK-A

Summary

Berkshire Hathaway Inc. (BRK-B) filed a Form 8-K on January 24, 2012, to report its ratio of consolidated earnings to consolidated fixed charges for the nine months ended September 30, 2011, and for the prior five fiscal years. This filing provides a snapshot of the company's ability to cover its interest and other fixed charge obligations with its earnings. For the nine months ended September 30, 2011, the ratio stood at 5.54x, indicating that earnings were more than five and a half times the amount of fixed charges. This is a key metric for assessing financial leverage and solvency. While the ratio for the most recent nine-month period shows a solid coverage, it's notably lower than the ratios reported for the full years of 2010 (7.18x) and 2007 (10.16x), though it remains stronger than 2008 (4.33x) and 2009 (6.13x). Investors should note the variability in this ratio across periods, influenced by fluctuations in net earnings and the level of fixed charges. The data illustrates Berkshire Hathaway's consistent ability to meet its fixed charge obligations over the reported periods, a crucial indicator of financial stability.

Key Highlights

  • 1Berkshire Hathaway Inc. reported its ratio of consolidated earnings to consolidated fixed charges for the nine months ended September 30, 2011, and for the fiscal years 2006-2010.
  • 2For the nine months ended September 30, 2011, the ratio of earnings to fixed charges was 5.54x.
  • 3This ratio indicates that Berkshire Hathaway's earnings were approximately 5.54 times greater than its fixed charges for the specified period.
  • 4The company's fixed charges primarily consist of interest on indebtedness and rentals representing interest.
  • 5The reported ratio for the nine months of 2011 (5.54x) is lower than the full year 2010 ratio (7.18x) but higher than 2009 (6.13x) and 2008 (4.33x).
  • 6The highest ratio reported in the filing was 10.16x for the year ended December 31, 2007.
  • 7This filing provides investors with a key metric to assess the company's financial leverage and its capacity to service its debt obligations.

Frequently Asked Questions

The ratio of consolidated earnings to consolidated fixed charges measures a company's ability to meet its fixed financing obligations, such as interest payments and rent, with its earnings. A higher ratio indicates a greater ability to cover these expenses.

For the nine months ended September 30, 2011, Berkshire Hathaway's ratio of consolidated earnings to consolidated fixed charges was 5.54x. This means that the company's earnings were over five and a half times the amount of its fixed charges during that period.

The ratio of 5.54x for the nine months ended September 30, 2011, is lower than the full-year ratios for 2010 (7.18x) and 2007 (10.16x), but it is higher than the ratios reported for 2009 (6.13x) and 2008 (4.33x). This indicates some variability in earnings coverage of fixed charges over the years presented.

According to the filing, fixed charges include interest on indebtedness (including amortization of debt discount and expense) and rentals representing interest and other.