Feb 12, 2004


My better late than never finance education ;-)

I picked this up from BusinessPundit: "The whole point of investing in a business is to get more money out than you put in. That basic tenet is sometimes lost on investors and corporate managers obsessed with growth. Businesses need cash to grow. They also need cash to pay salaries, research costs and dividends. As an investor, you want to know whether your company can afford to do all these things. Net income may not tell you this, but free cash flow will.
When it comes to cash, which companies actually use to meet their obligations, net income is not really the bottom line. Net income can be skewed by non-cash gains or charges. Cash provided by operations (CPO) provides a good check on reported earnings, since it involves fewer assumptions."