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According to Warren Buffet, a company is worth investing only when it creats value.To estimate corporate value,Buffet laid much emphasis on the ecomnomic circumstances.Of the 8 rules of his investing philosiphy,the following four points need special concern when judging corporate value.

<!--[if !supportLists]-->1.               <!--[endif]-->Cash Flow.Consistency of cash flow garentees the stability and smoothness of operation.Without sufficient funds as back-ups,even though the company may appear th make profit in the acounting statement,further success and expansion cannot be expected.

<!--[if !supportLists]-->2.               <!--[endif]-->Economic Reality.Since accounting reality deals mainly with the past,it is of less use when evaluating corporate potentials and future growth..The econmic reality,on contray, reflects the company’s prospect by taking into account intangible assets.With assets such as franchise,reputation and managerial know-how,the company enjoys some “privilege” when competing with its counterparts.

<!--[if !supportLists]-->3.               <!--[endif]-->Management. Able managers can add to corporate value by working to the shareholders’ benefit and helping the company out during crisis.Only in this case can the company survive in the changing market.

<!--[if !supportLists]-->4.               <!--[endif]-->Intrinsic Value.The discounted rate should be carefully chosen.The expected annual growth rate in intrinsic values best represents how much return the investors require,therefore is better than the theoretical discounted rate in measuring the intrinsic value.Predictable cashflow is favorable to make a better estimation.

As to GEICO,it is a wise purchase for the following reasons.

<!--[if !supportLists]-->1.       <!--[endif]-->GEICO is the 7th largest auto insurer with a long history.Its market share is considerable,covering 3.7million cars. GEICO’s reputation as the lowest...