RE:RE:RE:RE:RE:RE:RE:Great opportunity!I prefer Free Cash Flow as a measure, but we still need to understand the impact of interest expense as the company has already put a debt financing deal on the table. You have to give consideration to working capital and those balance sheet items are not just noise. You sell inventory, you have to buy more inventory. You use cash by extending terms with A/R, and you may not have exactly equal terms with your A/P, so there's a use of cash. But then, A/R get paid and that brings in cash. Inventory write-off is a use of cash, because that asset is no longer part of your working capital, and then you have to buy more inventory to replace what you had. The balance sheet is litterred with these kinds of activities that do indeed impact when you receive cash or when cash is needed to be used. You cannot ignore them, and you have to understand that a company can generate cash or limit the use of cash by doing things like offering discounts for early pay on receivables, delaying the purchases of new inventory while using up what's already on the balance sheet, slow paying payables. That feels like nosie at times, but it's what CFO's do to take advantage of current market conditions. So, working capital needs are hard to decipher maybe at times, but growing revenue more often than not results in a use of cash even while profit is increasing, but I don't have a good feel for the company's terms with customers and suppliers.
I actually can't stand the way the CFO presents the financials. I think it's too basic and if all you did was spread the financials and compare period-over-period or year-over-year and state the differences, you'd get close to his reports.
houbahop wrote: "You have to figure in the change in the balance sheet since it either gives you cash (like lower inventories), or uses your cash. Only way to figure full operational cash flow...."
Quite the opposite. Fluctuations in balance sheet items is noise when you analyse CFFO.