FCF vs Cash at end period

Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
#5
(19-11-2011, 06:33 PM)mrkoh Wrote:
(19-11-2011, 12:37 AM)Musicwhiz Wrote:
(18-11-2011, 11:56 PM)mrkoh Wrote: 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.
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
Reply


Messages In This Thread
FCF vs Cash at end period - by mrkoh - 18-11-2011, 11:56 PM
RE: FCF vs Cash at end period - by Musicwhiz - 19-11-2011, 12:37 AM
RE: FCF vs Cash at end period - by mrkoh - 19-11-2011, 06:33 PM
RE: FCF vs Cash at end period - by Nick - 19-11-2011, 06:50 PM
RE: FCF vs Cash at end period - by pianist - 19-11-2011, 02:23 PM
RE: FCF vs Cash at end period - by dzwm87 - 19-11-2011, 11:23 PM
RE: FCF vs Cash at end period - by em2nre5u - 20-11-2011, 01:23 AM

Forum Jump:


Users browsing this thread: 1 Guest(s)