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Strategies & Market Trends : Free Cash Flow as Value Criterion
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To: Andrew who wrote (201)11/12/1997 9:15:00 PM
From: jbe  Read Replies (2) of 253
 
Thanks, Andrew, for your response to my question. Now will the defenders of including working capital in the calculation of cash flow please stand up and say their piece?

Andrew, did you ever buy the Hackel & Livnet book (Cash Flow and Security Analysis), as you indicated you might? They have three weighty chapters on cash flow (in addition to the chapters on free cash flow), which discuss, among other things, different methods used to estimate cash flow. And they don't seem to have a problem with the FSAB rules under which working capital is included in the calculation of operating cash flow.

BTW, the free cash flow per share indicator on Pro Search is working again. And I find that by dividing the Pro Search free cash flow per share number into the price, Telescan in some cases -- like Market Guide -- ALSO comes up with free cash flow ratios that are lower than the cash flow ratios. This sort of thing gets my investigative reporter's juices flowing, but I know from experience that it is IMPOSSIBLE to get any sort of answer out of Telescan.

The point is that both Telescan and Market Guide are clearly using the same method of calculating cash flow & free cash flow. And I would not dismiss it out of hand without giving them a hearing (if they will deign to provide us with an explanation) if for no other reason than that the information they provide is much more comprehensive than anyone else's.

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