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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (177576)	4/14/2004 6:32:31 PM
From: rkral	Read Replies (1) \| Respond to of 186894

Lizzie, you didn't [ed: make a connection between taxes and expensing options]in your answer. Perhaps you misunderstood the question. Ron

To: Lizzie Tudor who wrote (177576)	4/16/2004 3:33:46 AM
From: brushwud	Read Replies (1) \| Respond to of 186894

I doubt companies in the 30s and 40s were generating double the cash vs. earnings. Back then, with a cleaner tax code, earnings and cash were probably pretty close. Today, cash = earnings and earnings = something companies play with. You have a rather mystical notion of cash flow. (Also, cash is a stock variable you'd find on a balance sheet and cash flow is a flow variable you'd get from an income statement.) By definition, Cash flow = Earnings + Depreciation and Amortization. That's like saying, Square of hypotenuse = Square of one leg + Square of other leg. A company with cash flow of 2x earnings has a lot of depreciation and amortization. Both depreciation and amortization are sunk costs spread out over years. But they are true costs, just like salaries or rent or interest. Intel is an example of a capital-intensive business with a lot of depreciation. They can't simply reap cash flow and maintain their business model without continuing capital investments which result in depreciation in future periods. Even Yahoo says, "Free cash flow is defined as cash flow from operating activities less capital expenditures...These measures [cash flow & free cash flow] should be considered in addition to, not as a substitute for, or superior to, gross profit, income from operations...or other measures of financial performance prepared in accordance with GAAP."