Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
The Rule Maker looks for a Cash Margin greater than 10%. I understand
The Free Cash Flow Margin is similar to the net margin, except that instead of measuring profits with net income from the income statement, we use Free Cash Flow (FCF)from the cash flow statement. The advantage of measuring profits with free cash flow is that cash flow isn't as easily manipulated as net income. I understand The calculation here is Free Cash Flow divided by Sales. And, to look for companies that generate lots of the green stuff.

Turning to Intel's cash flow statement for 2000, we see that the silicon king generated $12.8 billion in "Net Cash Provided by Operating Activities." ...also known as just "Cash Flow" ...it's not "Free" untill the Capital Expendutrures are subtracted out.

I also understand you can see that the company invested $6.7 billion in
"Additions to Property, Plant, and Equipment." Calculating Free Cash Flow is a simple matter of taking Operating Cash Flow ($12.8B) minus capital expenditures, including total investing activity of ($6.7B), which leaves us with $6.1 billion in cash that Intel has free reign to distribute to shareholders either as a dividend or via a share buyback -- or it could just sock it in the bank.

We're now ready to calculate the Free Cash Flow Margin;
Intel Fiscal Year 2000
Sales Net Cash Cash Margin
$33.7B $6.7B 18.1%

In other words, for every dollar of sales, Intel generated 18.1 cents
in free cash flow. On all this, I understand:

Total Cash from Operating Activities (12.8)
- Capital Expenditures (6.1)
= Free Cash Flow of 6.7

However.....
>>>>> Other Investing Cash Flow Items = ($3,361.0) <<< ?????

Question: Why doesnt the metric here take into account
"Other Investing Cash Flow Items, and for this "Cash Margin"
Measurement is Capital Expeditures the "only" item subtracted
from Total Cash From Operating Activity?

Thanks
Print the post  

Announcements

When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.