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How to Interpret and Use Free Cash Flow
By The Moss Piglet  •  July 13, 2020
Alan Miltz has this saying that “Revenue is Vanity, Profit is Sanity and Cash Flow is King”. I agree with him that the importance of cash flow can never be understated in a business. In this post, I will look at the concept known as free cash flow and why it is important, what it means and how to use it when analyzing companies. Also, at a more basic level, how to derive free cash flow from the company’s financial statements.

What is “Free Cash Flow” and Why is it Important?

If you try to look up “Free Cash Flow”, or FCF, on the internet, you will get multiple different definitions. This is because people define it differently, and companies also define it differently depending on the industry. BUT… The basic idea of FCF is very simple; It is a company’s yearly discretionary cash flow. In other words, after a company pays off its expenses,...
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By The Moss Piglet
This blog is named after the world’s most indestructible creature – the moss piglet, or also known as tardigrades. These microscopic animals are even more hardier than cockroaches and will continue to thrive for billions of years. The reason why this microbeast is chosen to represent this blog is that we aim to create a resilient investment portfolio for all stages of the economic cycle.
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