Warren Buffett is one of the richest investors in the world right now, and I want to say something interesting that he did. He purchased a huge company called Clayton Homes for $1.7 billion without having ever seen the people who owned it. Can you believe that? He claims that this was made possible by using what he considers as very important: accounting.
Now, what do we mean by accounting? Well, accounting is equivalent to business language because it is through it that firms keep track of their finances. Buffett suggests that if you can’t understand accounting, you hardly become good in business.
I think that’s really clever because if a person can not read financial statements of an organization, then it would be like going to another country knowing nobody else’s language. You will get lost.
Buffett has said that his great understanding of accounting made him a lot of money, and I trust him. He is one of the wealthiest individuals in the world; consequently, he must be knowledgeable in these matters!
Now, back to Clayton Homes. Buffett liked this firm so much that he wanted to acquire it; however, he did not want any face-to-face meeting with its owners. Instead, he read everything about it’s financial records such as annual reports and filings with SEC.
This way Buffet could tell a lot about the company without even speaking to the owners. He would look at how well the company was doing and if he would make any good profit from investing in it.
Buffett purchased Clayton Homes for $1.7 billion after reading all the reports. Imagine this: he did it on a phone call. Even in person, he never came across them.
I find that amazing. It just goes to show how critical accounting is in business. Should you be able to go over financial reports like Buffett, then you can make some smart decisions and perhaps become a billionaire.
Some individuals may consider accounting as dull but for me it is really fascinating. It can be compared to a jigsaw puzzle only that instead of different pieces there are numbers. If you will manage to solve this puzzle you can make a lot of money, like Warren Buffett.
Therefore if you have plans of venturing into any business, ensure that you familiarize yourself with the concepts in accounting. It could seem difficult at first but it is actually very significant. Who knows maybe one day you might make a billion dollar deal over the phone like Warren Buffet.
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