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.