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To: CitizenKane who wrote (58501)	11/17/2016 7:12:03 AM
From: Graham Osborn	Respond to of 78423

I'm not sure I fully understand your comment, but I generally agree - FCF is useful when the company is growing organically without unusually categorized reinvestment, and certainly for mature companies. But when a company is acquiring or merging with large companies (significant fraction of its EV) on an annual basis, you get a huge artificial CFO benefit (revenue from the acquiree being recognized by the new parent while costs are not) as well as a working capital benefit. Further, some acquirers will deliberately suppress revenue from the acquiree during the months leading up to closing, which can artificially boost results afterward. Add that together for one or two large acquisitions per year and you get CFO pyramiding which goes away as soon as the acquisitions stop. Note, however, that a company can be accounting for everything perfectly properly and still get a similar (though lesser) CFO pyramiding effect. That's why Schilit advocates FCF after acquisitions in these cases.