Andrew - I understand you perfectly. You make a good, and very clear, case.
I just wanted to hear someone argue the opposing case (i.e., the case for INCLUDING changes in working capital in the calculation of FCF), for a variety of reasons. For one thing, my (and no doubt just about everyone else's) interest in FCF is practical rather than theoretical. It is one of the measures I (try to) use to decide which stocks to buy, keep, or sell. And it would certainly simplify the task if there were more agreement about how to measure that measure! As it is, it is hard to make comparisons among companies, as long as there is disagreement among sources/individuals on this key point. Is Company A's performance in this regard superior to that of Company B's? According to you, the answer might be yes; according to someone else, it would be no.
My gurus point out that calculating free cash flow is "intuitive." Obiously true, but from my point of view also obviously unfortunate. How much simpler just to take the price/FCF ratios as given by Telescan and Market Guide and drop them into a spreadsheet, and voila! an automatic ranking of any and all companies you are interested in.
As it is, I feel I need to hear the arguments for as many different calculation methods as possible, before deciding for myself exactly how I should proceed. (Of course, given the fact that I am an amateur, some methods will automatically have to be ruled out, simply because they are too complex.)
Clearly I am going to have to do some more reading on this subject, but things are round-the-clock crazy here as well, and it is hard enough to keep up with what I am "supposed" to read!
Best,
Joan
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