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Dear nanhalia,

Just a couple of comments in addition to TMFBobdog:

One problem with "cash flow" is that there seems to be many different definitions for it. I've heard some folks call "EBIDTA = cash flow". The EVA guys talk about "free cash flow = NOPAT (net operating profits after taxes) - invested capital", where invested capital = cap ex + additions to net working capital.

There are several models out there to try to figure out what true "earning ability" of a company is. That should be the goal more than any formula.

BTW, what sorts of books are you reading? Perhaps if you post some formulas we could be of more help.

Best,

Lleweilun Smith
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