Buffett says, “The ‘operating earnings’ of which we speak here exclude capital gains, special accounting items and major restructuring charges.”[xlii] Operating earnings is the income that flows from a business’s operations. It leaves out interest and taxes. It also leaves out unusual, one-off things like gains from selling an asset or settling a lawsuit. The one-off items are left out because they won’t occur again in the future. They don’t show the usual operations of the business.
