Analyzing Cash FlowCan you please explain why EQB would have negative free cash flow? On their cash flow statement, they have large negative numbers under "change in Other Net Operating Assets". What does this refer to?
EQB, as a financial company, has the same issue as GSY. Its free cash flows are negative, although the company is highly profitable. The reason cash flows display as negative is due to a constant negative change in net operating assets. This essentially represents the change in gross consumer loans receivable, which in conventional terms, offsets positive cash flows. We would view its 'cash from operations before net growth in consumer loans receivables' as a more reliable metric. This puts its last 12 months adjusted free cash flow around $457M. (5iResearch)