Marcin Narloch marcinnarloch.me

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Define the major cash flow concepts, and state one limitation of each.

By Marcin Narloch, 24 March 2012

  1. Net Income + Amortisation + Depreciation + Depletion = Cash Flow (CF)
    Ignores changes in working capital and non-cash items.
  2. Cash Flow from Operations (CFO)
    It’s not a free cash flow concept.
  3. Free Cash Flow to Equity (FCFE)
    Very variable metric, can be negative, but a good metric for steady companies.
  4. Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA)
    Similar to CF (number 1 above) in that it ignores changes in working capital and non-cash items.

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