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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
Friday, April 25, 2008
Analysis
Soaring Food Prices Put Focus on Biotech Crops
Dunstan Prial
FOXBusiness
In Europe, they’ve been called Frankenfoods. In India, Africa and other developing areas of the world, they’re viewed by many as miracles.
Since emerging in the 1990s, genetically engineered crops altered by science to resist pests, disease and herbicides have been embraced by some and resisted by others.
A dramatic increase in the price of food commodities in recent months has lifted the profile of what are called biotech crops, however, giving supporters an opportunity to exhort their benefits.
“I firmly believe there’s no way we can feed the world without them,” said Martin Barbre, a farmer in southeastern Illinois and a member of the National Corn Growers’ Association.
Barbre and others believe potential worldwide food shortages caused by sharp increases to the prices of rice, corn, soy beans and other food staples will force doubters to change their views.
“I think it has to change by necessity,” said Barbre, who chairs the NCGA’s biotech working group.
Foes say the effects on humans and the environment remain unknown.
First introduced commercially in the U.S. in 1996, biotech crops have helped growers to substantially increase their yields per while reducing costs -- both financial and environmental.
Supporters note that growers who use pest and disease resistant seeds don’t have to spray chemicals on their food crops to ward off insects. Thus farmers are spared the cost of the pesticide and the environment is spared from the chemicals.
And cotton growers using herbicide resistant plants can reduce soil erosion by spraying their fields to kill weeds rather than tilling the soil.
Paul Schickler, president
of Pioneer Hi-Bred International Inc., the largest U.S. producer of biotech crops, said the response has been positive in
the U.S., Canada and many developing nations, but that resistance has been strong in Europe.
Indeed, Europe is where the
term Frankenfoods originated.
“As new technologies and sciences are introduced, there is always doubt,” said Schickler.
Europeans have a different cultural attachment to their food than Americans that makes Europeans leery of scientific intervention, Schickler explained.
“Europeans have always been self-sufficient. They’ve never had to import food and they look at it as part of their heritage, part of their culture,” he said.
But now that costs for producing food are soaring and Europe has been forced to begin importing some of that resistance is “softening,” he said, because “it’s been recognized that science and technology can help solve some of these issues.”
Rising food prices has reached the crisis level, according to global
relief agency officials. World Food Program executive director Josette Sheeran last week described the price surge in food
related commodities as a “silent tsunami.”
The World Bank has estimated that food prices have risen by 83% in three years.
The sharp increase in the cost for food staples, lifted by rising fuel prices and rising demand in countries such as India and China, has led to violent protests in the Caribbean, Africa and Asia.
Meanwhile, the use of biotech crops is spreading globally.
The International Service for the Acquisition of Agri-biotech Applications, a trade group, said in a recent report that global biotech crop area grew by 12% in 2007.
In addition, the ISAAA said 2 million additional farmer planted biotech crops last year, raising the number worldwide to 12 million. Of those, 11 million are what’s known as resource-poor farmers from developing nations.
“With increasing food prices globally, the benefits of biotech crops have never been more important,” said ISAAA chairman Clive James.
Finally, the number of developing countries planting biotech crops reached 12 in 2007, surpassing by one the number of industrialized countries using them, according to the ISAAA.
India and China have been especially receptive to the new technology, focusing primarily on biotech cotton. Brazil is expanding its use from from soybeans and cotton to include maize.
South Africa is the only African nation planting biotech crops, a point supporters blame on fear of innovation and an inability to introduce the technology in severely impoverished countries.
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