In an era where there is an oversaturation of financial information, most of the value investors tend to get confused with what to analyze and look for while investing in a company. Here comes the metric that Warren Buffett uses to select any stock. For a shareholder, value is created in two ways: either by receiving dividends on their stocks or capital appreciation. As per Warren, when a company retains ₹1 of the net income, its market value must appreciate at least by ₹1 to pass the $1 test. Couldn't understand a thing?? Read further, and you will get your answer. “Unrestricted earnings should be retained only when there is a reasonable prospect—backed preferably by historical evidence or, when appropriate, by a thoughtful analysis of the future—that for every dollar retained by the corporation, at least one dollar of market value will be created for owners. This will happen only if the capital retained produces incremental earnings equal to, or above, those generally available...