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Strategies & Market Trends : Free Cash Flow as Value Criterion
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To: Greg Jung who wrote (151)11/4/1997 11:19:00 PM
From: jbe  Read Replies (1) of 253
 
Greg -- I'm also not sure I grasp your question, but are you clear on the following points?

1) The balance sheet and the consolidated statement of cash flows skin the cat very differently.

2) Net income plus depreciation & amortization does indeed equal (operating) cash flow.

3) The simplest (there are others) definition of free cash flow is operating cash flow minus REAL and NECESSARY capital expenditures. (In other words, the cash flow statement cannot "spread out" the expenditures over a number of years, but must deal with the actual amount of money actually spent in that given year. Depreciation is, essentially, a convenient fiction.)

But I am afraid this is all too obvious, and that I may be insulting your intelligence. Sorry if I misunderstood your question.
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