Annual free cash flow (cash flow from
operations minus capital spending, capitalized development costs, and dividends) was $1.
For the three-year period, less than half the companies had sufficient cash flow from operations to cover primary cash requirements.
When compared to accrual income from continuing operations, the cash flow from operations ratio also is useful.
These sufficiency and efficiency ratios provide additional information (over traditional financial ratios) about the relationship between cash flow from operations and other important operating variables.
Customers can download the reference flow from
Magma's website at http://www.
Cash flow from operations is increasingly viewed as the best measure of business performance because it can't be easily manipulated by adjusting reserves or through creative interpretations of generally accepted accounting principles (GAAP) accounting.
Certain corporations surveyed maintain a practice of disclosing basic elements of the cash flow statement verbally during their quarterly earnings conference calls, including: depreciation, amortization, capital expenditures and, in some cases, estimated cash flow from operations.
While cash flows from investing and financing are important components, the most scrutinized figure is likely to be cash flow from operations.
The important point is that cash flow from operations, just like income from operations, can include a diverse mix of transactions representing a variety of unusual events.