The amount of excess unencumbered cash flow left over after a company has invested to both maintain its assets. The most creative person in the world could not come up with another use of free cash flow. Some people say, whell, you can use your free cash flow to invest in research and development. Incorrect, incorrect. You have already invested in research anddevelopment through the income statement to get net income. And then remember, net income the bottom line of the income statement. Net income became the top line of the cash flow statement.
Motley Fool Senior Analyst John Rotonti continues his discussion on the most important financial statements, focusing on the cash flow statement and what it reveals to investors. In part two of this two-part series, Rotonti discusses: - How net income becomes free cash flow - The choices companies can make with free cash flow (and why investors should care) - Margins that can indicate the health of public companies Bonus resource! How Net Income Becomes Free Cash Flow: https://www.fool.com/investing/general/2014/09/24/reconciling-net-income-to-free-cash-flow.aspx
Stock discussed: CMG Host: John Rotonti Producer: Ricky Mulvey Engineer: Rick Engdahl
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