No. of Recommendations: 0
Regarding the Cash King Margin and Free Cash Flow. How should we treat financial companies who have negative cash from ops because purchases/sales of securities affect the total assets/liabilities? For example here is Morgan Stanley Dean Witter's CF Statement from their 1999 10-K:

fiscal year (dollars in millions) 1999 1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 4,791 $ 3,276 $ 2,586
Adjustments to reconcile net income to net cash (used for) provided by
operating activities:
Non-cash charges included in net income:
Cumulative effect of accounting change -- 117 --
Gain on sale of businesses -- (685) --
Deferred income taxes (160) (55) (77)
Compensation payable in common or preferred stock 675 334 374
Depreciation and amortization 541 575 338
Provision for consumer loan losses 529 1,173 1,493
Changes in assets and liabilities:
Cash and securities deposited with clearing organizations or
segregated under federal and other regulations 839 (3,641) (1,691)
Financial instruments owned, net of financial instruments sold,
not yet purchased (22,081) 11,127 1,730
Securities borrowed, net of securities loaned (8,798) (5,061) (10,561)
Receivables and other assets (11,276) 2,114 (13,808)
Payables and other liabilities 5,669 6,095 19,058
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Net cash (used for) provided by operating activities (29,271) 15,369 (558)
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CASH FLOWS FROM INVESTING ACTIVITIES
Net (payments for) proceeds from:
Office facilities (656) (358) (301)
Sale of businesses, net of disposal costs -- 1,399 --
Purchase of AB Asesores, net of cash acquired (223) -- --
Net principal disbursed on consumer loans (8,769) (2,314) (4,994)
Purchases of consumer loans -- -- (11)
Sales of consumer loans 2,997 4,466 2,783
Other investing activities -- -- (5)
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Net cash (used for) provided by investing activities (6,651) 3,193 (2,528)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (payments for) short-term borrowings 9,994 5,620 (1,336)
Securities sold under agreements to repurchase, net of securities
purchased under agreements to resell 21,327 (14,407) 3,080
Net proceeds from (payments for):
Deposits 2,200 (796) 2,113
Issuance of common stock 270 186 194
Issuance of put options 9 -- --
Issuance of long-term borrowings 7,552 9,771 6,619
Issuance of Preferred Securities Issued by Subsidiaries -- 400 --
Issuance of Capital Units -- -- 134
Payments for:
Repayments of long-term borrowings (6,618) (7,069) (3,964)
Redemption of cumulative preferred stock -- (200) (345)
Redemption of Capital Units (416) -- --
Repurchases of common stock (2,374) (2,925) (124)
Cash dividends (575) (519) (416)
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Net cash provided by (used for) financing activities 31,369 (9,939) 5,955
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Dean Witter, Discover & Co.'s net cash activity for the month of
December 1996 -- -- (1,158)
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Net (decrease) increase in cash and cash equivalents (4,553) 8,623 1,711
Cash and cash equivalents, at beginning of period 16,878 8,255 6,544
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Cash and cash equivalents, at end of period $ 12,325 $ 16,878 $ 8,255
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Marv
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