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Hello Jon,

Your questions are thoughtful. I too have wrestled with cash flow, and it appears that, since there is no industry-appropriate "cash flow ratio" to judge cash flow adequacy, about the best one can do is to look at cash flow from operations to see what it is being used for, e.g., what kinds of capital expenditures (aka capex) are being made, and whether those expenditures are appropriate for that company. One must know the company well to make this kind of evaluation.

Also, I have heard that cash flow should be growing over time in absolute terms as well as in terms of cash show per share.

When looking at cash flow do not forget to look at all-important ratios such as debt to equity, and times interest earned. Gotta be able to pay those bills.

I will defer speaking to your second question.


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