I have read the article "What Is Free Cash Flow?" by Bill Mann. Pretty straightforward. My question is - what do I do with the cash flow figure once I have it calculated? Do I compare it with some other item in the financial statements, or compute a ratio of some kind, or what? What is a "good" free cash flow, and what isn't? Thanks.
Dear Boriss,I think you may want to compare it to earnings. If it is much higher, accounting income may be understating the cash earnings value of a company, and vice versa.Lleweilun Smith
boriss98, what do I do with the cash flow figure once I have it calculated? I compare FCF (current) to previous periods within the same company. Within the same sector, FCF comparisons may help define which business is executing better, esp. as a ratio of FCF to net. I am just starting to use it as an input in DCF computations where it seems to be quite useful.Bruce
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