Just as your pulse is checked during a routine physical, free cash flow is used as an indicator of a company's health. It equals the cash brought in from operations minus the money needed to pay the bills. Think about leftover money in your checking account after you pay this month's bills.

Investors and analysts see this leftover money as a gauge of a company's ability to perform. It is available for transactions such as handing out dividends and working on new products.

Some argue free cash flow is wrongly overshadowed by the emphasis often placed on earnings. Earnings numbers can be manipulated and don't always tell the whole story -- and earnings don't mean much if there's nothing left over after a company pays its expenses. Even if you bring in a six-figure salary, but no money left after paying the bills, are you in great financial shape?

You don't have to be Einstein to figure out free cash flow. To calculate the number, subtract the company's expenditures and dividends from its operating cash flow.

If the free cash flow is written in red ink, it doesn't necessarily signal curtains. This is common for young companies looking to grow. It also could be a result of heavy investments, which in the long run could be worth a standing ovation.

Home / Markets / Industries / Finance

Friday, June 20, 2008

BestWeek: After the Fall, Fence Mending at AIG

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OLDWICK, N.J., Jun 20, 2008 (BUSINESS WIRE) ----The sudden ouster of American International Group's Chief Executive Officer Martin Sullivan on June 15, and his replacement with board Chairman Robert Willumstad, led to a week of uncertainty about the insurance giant's future among investors, analysts and AIG observers, according to a story in BestWeek U.S./Canada.

The possibility of some level of rapprochement between the AIG board of directors and the man Sullivan replaced, Maurice "Hank" Greenberg, added to the intrigue in the week following Sullivan's abrupt dismissal and the naming of Willumstad as the new chief executive.

Willumstad confirmed through a spokesman that he met with Greenberg on June 19, and described the meeting as "positive," but declined to comment further.

Also, in BestWeek Europe: A U.K. High Court case is considering at what point an insurance policy should take effect: when exposure to asbestos began or when claimants became sick. Insurers are hoping the case lessens the uncertainty surrounding claims related to asbestos and the disease mesothelioma.

Also, in BestWeek U.S./Canada: For insurers, it could be the perfect storm of bad news: how to deal with declining rates when the cost of everything else, from oil to food to labor, is going up.

And in both editions of BestWeek: The Best's Global Insurance Composite Index finished the week of June 19 down 21.14% from a year ago. The composite index reflects the performance of 167 insurance stocks. The week's top stocks were Atlantic American Corp., Affirmative Insurance Holdings, Infinity Property & Casualty Corp., National Interstate Corp., and Navigators Group.

The bottom five stocks were Coventry Health Care, Beazley Group, Cincinnati Financial Corp., UnitedHealth Group, and Humana.

BestWeek is published by A.M. Best for insurance professionals. To subscribe, please call A.M. Best's customer service department at (908) 439-2200, ext. 5742, or e-mail your request to customer_service@ambest.com.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

SOURCE: A.M. Best Co.

A.M. Best Co. Caroline Saucer, 908-439-2200,
   ext. 5774 caroline.saucer@ambest.com

Copyright Business Wire 2008 **********************************************************************
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   on 05-08-2008 for AIG @ $44.66. For more information on SmarTrend, contact your market data provider or go to www.mysmartrend.com
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