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To: paul_philp who wrote (52179)	7/17/2002 11:07:29 PM
From: A.L. Reagan	Respond to of 54805

At the end of nine innings FCF = GAAP earnings or the balance sheets dont balance. You are of course absolutely correct over the very long run - provided your GAAP earnings base includes all the special charges for "non-recurring things we recurringly screw up" aka restructuring, disco ops, big goodwill write-downs, etc. I rarely see these things in earnings models. For instance, did JDSU's $50 billion goodwill write-down make it into the composite S&P earnings stats? I do not know the answer, but I rather doubt it. Things get even messier on a per share basis. If you have an enterprise that is constantly issuing shares at say $5 strike price for options exercised and then repurchasing an equal number of shares at say $20 market price, the accounting symmetry on a per share basis falls apart, as the $20-$5 differential never shows up in the GAAP model (for most companies, currently), but, alas, the cash is gone out the door never to be received by Mr. Common Shareholder. I realize that most of the definitions of free cash flow wouldn't deduct for share repurchases to maintain a constant outstanding share count in the face of option exercises - but, where's the cash? Where have all the dollars gone? Long time passing. Where have all the dollars gone? CEO's picked them, every one When will they ever learn? When will they, e-ver learn? Apologies to Pete Seeger

To: paul_philp who wrote (52179)	7/18/2002 1:20:07 AM
From: Stock Farmer	Read Replies (1) \| Respond to of 54805

Paul - no need for a study. FCF = GAAP Earnings - Assets Acquired + Depreciation At the end of nine innings, the sum of (Depreciation - Assets Acquired) had better be equal to zero. Either that or you have (a) Assets that don't depreciate, or (b) Depreciation of assets that never existed. Thus FCF = GAAP earnings. Sans Study. In one's computation for Free Cash Flow, important to look at cash and non-cash capital acquisition costs. Such as when a company purchases assets (like another company's IP etc.) for stock. John