FCF vs Cash at end period

[mrkoh]

Hi. Could anybody explain to me what is the difference between Free Cash Flow and Cash at end period on the cash flow statement?

[Musicwhiz]

Hi. Could anybody explain to me what is the difference between Free Cash Flow and Cash at end period on the cash flow statement?

To put it very simply.

FCF = OCF minus Capex

Cash at End of Period = Cash at Beginning + ALL cash flow movements from Operations, Investing and Financing.

Hope this explains.

[pianist]

how do u derive capex from a typical financial announcement for a quarter

[mrkoh]

Hi. Could anybody explain to me what is the difference between Free Cash Flow and Cash at end period on the cash flow statement?

To put it very simply.

FCF = OCF minus Capex

Cash at End of Period = Cash at Beginning + ALL cash flow movements from Operations, Investing and Financing.

Hope this explains.

does cash at end period refers to the cold hard cash in the bank which can also be used to pay dividends? if so, shouldnt we be keeping a close watch on ALL cash flow movements from Operations, Investing and Financing to ensure growth in the bank account?

[Nick]

Hi. Could anybody explain to me what is the difference between Free Cash Flow and Cash at end period on the cash flow statement?

To put it very simply.

FCF = OCF minus Capex

Cash at End of Period = Cash at Beginning + ALL cash flow movements from Operations, Investing and Financing.

Hope this explains.

does cash at end period refers to the cold hard cash in the bank which can also be used to pay dividends? if so, shouldnt we be keeping a close watch on ALL cash flow movements from Operations, Investing and Financing to ensure growth in the bank account?

The bank account cash balance can be grown by borrowing from the bank ie you have $1000 generated from the operation and spend $800 on capex and borrowed $1000 from the bank. Your cash balance left is $1200 but your free cash-flow is only $200. So that's a pretty big difference ! You also have a net debt position of $800. Technically, you could use the remaining $1200 to pay a dividend but that would mean that the company is borrowing money from the bank to pay a dividend - not necessarily a sustainable thing to do.

[dzwm87]

This will be how I see it:

You need a company to generate FCF so that you know the business has quality and not just produce excellent accounting paper profit.

However, generating positive FCF can be cooked in its accounting books as well. What I will normally then see is their historical dividend payment. If they have been paying at least 25% of its PAT payout ratio (25% as being the rule of thumb dividend policy), then I will see this company has quality subjected to them producing positive FCF. Sometimes you may need to do a comparison between FCF & dividend payment as you may run into cases when there is good dividend payment but the company is generating negative FCF, hence, there is a possibility dividend is paid via share other source of cash input (i.e. debt financing).

In all, I will feel doing a analysis of the CF statement might be time-consuming as you will be doing a lot of "reverse engineering" figuring how the cash flow works and where and which cash come from.

[em2nre5u]

since we minus capex which is an investment, then why not include the cash gained from investment actvities as well?