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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 / Retail
Thursday, May 08, 2008
Wal-Mart Sales Top Estimates
FOXBusiness
Retail titan Wal-Mart's sales stayed afloat in April amid the turmoil in the economy, rising 3.2% to top Wall Street's expectations.
Wal-Mart (WMT) relieved the market, which was worried soaring energy and food prices along with gloomy economic headlines would cause slower sales at the key retailer.
The 3.2% rise in April same-store sales excludes fuels and beats estimates from Thomson Reuters for a smaller 2.1% increase. Including fuel, Wal-Mart's sales rose 3.8%.
Wal-Mart, which is one of 30 members of the Dow Jones Industrial Average, issued a somewhat cautious forecast for May, predicting flat to up 2% same-store sales.
Sam's Club, which is a division of Wal-Mart, reported a 6.8% increase in April same-store sales. The results were fueled by the shift in the Easter holiday as well as strong sales in dry grocery, office supplies, furniture and video games. However, Sam's Club saw weakness in apparel, housewares and jewelry.
Those results beat the namesake chains' 2.6% rise in sales. Wal-Mart Stores' sales were boosted by its results in grocery, entertainment and health and entertainment. Wal-Mart also said sales in the home area remains "soft," while apparel sales rebounded.
"The economy continues to get tougher and the 'paycheck cycle' is more pronounced for customers than in past months. As money gets tighter for them toward the end of the month, sales drop more than we have seen in the past," Eduardo Castro-Wright, chief executive and U.S. president of Wal-Mart Stores, said in a statement.
Wal-Mart's international sales growth easily beat domestic results, soaring 18.4%. Sales in China jumped by double-digits.
Earlier on Thursday Costco (COST) reported a solid 8% increase in sales, easily beating expectations from Thomson Reuters of a 6.1% jump.
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