LH:
Get 10 people in a room and ask them the definition of cash flow, and you'll likely get 10 different answers.
I use these, (and if isn't readily apparent, I always ask someone for their definition when they start throwing out numbers) :
Cash Flow: EBITDA (Earnings before interest, taxes, depreciation and amortization)
When comparing companies in the same industry, this is often the best metric because it eliminates distortions caused by differing tax rates, depreciation policies, dividend policies and capital structures.
Operating Cash Flow: Net income plus non-cash charges, e.g., depreciation, amortization, accrued interest (e.g., from zero coupon debt), etc.
Some would argue that changes in net working capital (NWC=CA-CL) should be here as well, not including changes in restricted cash - since this will capture inventory, AR and other cash effects from changes in the performance of the business.
Free Cash Flow: Operating cash flow minus capital expenditures, all net changes in working capital, dividends and investments.
In DCF analysis, free cash flow is the bogey.
...
...The original statement did not even state that the cashflow was net positive, neh?
Back on topic, when someone says $x cash flow, 99% of the financial community will presume a positive amount. Negative cash flow is always explicitly stated.
I agree however that they left themselves some wiggle room. <g>
ww |
