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To: Lee who wrote (146842)	11/10/1999 12:39:00 PM
From: Chuzzlewit	Read Replies (3) \| Respond to of 176387

Lee, thanks for the link. A couple of caveats are important. I use operating cash flow as a substitute for earnings,largely because it cuts through a lot of accounting nonsense.For example, companies that are overly aggressive in booking sales show big increases in A/R. But when you adjust operating income to come up with operating cash flow you subtract increases in A/R. Another advantage in using cash flow analysis is that you see what a company actually paid in taxes rather than the customary "provision for taxes" which is based on GAAP earnings rather than IRS rules. But it's dangerous (and mathematically incorrect) to use operating cash flow for NPV calculations, because growing companies are continually increasing their investments in plant, equipment, and acquisitions. So what you really want to use is a measure called free cash flow. Free cash flow is basically operating less new investments in fixed assets. TTFN, CTC