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OklaBoston (61.31)

Cash Flow Question



November 10, 2009 – Comments (2)

I'm thinking I could use a refresher course on exactly what "cash flow" is. Specifically how it differs from earnings, and how "free cash flow" differs from "ordinary cash flow". I must have known this stuff once, but forgot it somehow, possibly from an erroneous belief that other things were more significant, or could be measured more precisely.

Are there any websites about this that are useful to non-accountants like myself?

2 Comments – Post Your Own

#1) On November 11, 2009 at 12:17 AM, rd80 (96.69) wrote: should have what you need.

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#2) On November 11, 2009 at 4:17 AM, KamranatUCLA (29.32) wrote:

Cash flow is always a better way to find out a company's health. Net income can me manipulated in soooo many ways. Cash flow can also be manipulated but not for a long time. Cash is cash is cash. Net income could include income that has not reliazed yet. Most companies if not all are in accrual basis which means they record a sale when they invoive the what if the customer doesn't pay or doesn't pay on time and so on.

I have studied a lot of accounting and all i have learned is this: Madoff was more honest than anyone else in the business.

I have basically lost my trust in the American accounting system or I should say: accountants. Accountants can cook the books anyway they like and make everything apear as they like. The problems is that in bad economy that can work only for so many days until time runs out and everything comes down imploding.

Free cash flow: is nothing free about it. All it means is that it's the cash flow that doesn't involve capital expediture.

An old Persian (I was born in Iran) saying says:  the man who accepts and gives credit is always broke. a man who works on cash basis is always rich. 

Now this is 4000 years of trading talking vs 200 years of the USA.

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