Jay Taparia is principal, Sanskar Investments, Inc.; director of education, Investment Analysts Society of Chicago; and professor/lecturer at the University of Illinois at Chicago. .


Wayne Whitehead from FL posted over 3 years ago:

Nice concise discussion with language even I can understand. Thanks

Jack Franklin from CA posted over 3 years ago:

Excellent article!

James Etherton from CO posted over 3 years ago:

Free Cash Flow is the term used to describe how much is left over after all expenses have been paid. It represents management's effectiveness in providing for mergers, dividends, research and future growth of the company.

Calculating Free Cash Flow is a tedious and time consuming process. As a small investor I am not willing to do it when Yahoo, Value Line and others more professional than I freely provide the information.

If I had only one data point to use in evaluating a company, it would be Free Cash Flow.

Thomas Kraynak from OH posted over 3 years ago:

I believe that analyzing the cash flow statement is the best way to evaluate the financial condition of a company.

Calculation of free cash flow.
I usually like companies that have decent free cash flow.
I calculate free cash flow from the most recent quarter and the most recent year.
I make my own calculation (Net Income + Depreciation - Capital Expenditures - Common Dividends paid). I don't know why but my calculation of free cash flow sometimes differs from Yahoo's).

I usually do not buy a company that uses debt or stock sales to pay a dividend. In fact I use this calculation to sell a stock.
I don't like it when (Net Income + Depreciation - Dividends Paid)is negative.
I like to use this for REITs and MLPs.

Debt/Equity ratio
I also like to review the Debt/Equity ratio of a company. I use different ratios for different industries. In general I like companies that have lower Debt/Equity ratios for their industry.

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