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.

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Tuesday, August 19, 2008

Apple: Battery to Blame for iPod Overheating

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Associated Press

Apple Inc. said Tuesday that batteries from a single supplier are to blame for the meltdown of some models of its tiny iPod Nano digital music player.

The company's written statement came in response to a Japanese government report that two iPod Nanos overheated in Tokyo, scorching nearby paper and a woven straw mat.

Apple said the flaw affected first-generation Nanos, sold between September 2005 and December 2006, in very rare instances. The company's statement added that "There have been no reports of serious injuries or property damage, and no reports of incidents for any other iPod Nano model."

Japan's government has been working with Apple (AAPL) to investigate three separate cases of iPods that overheated while being recharged, according to Ministry of Economy, Trade and Industry official Hiroyuki Yoshitsune. A defect in the lithium-ion battery was suspected in all three cases.

Millions of lithium-ion laptop batteries made by Sony for Apple, Dell Inc., Lenovo Inc. and other PC makers were recalled in 2006 and 2007 after it was discovered that they could overheat and ignite.

Apple did not immediately return a call seeking the name of the company that made the iPod batteries in question. Yoshitsune declined to name the supplier.

No one was injured during the two Tokyo incidents disclosed Tuesday. Yoshitsune said the cases involved an iPod Nano, model number MA099, which singed nearby paper in August, and model MA005, which burned a traditional Japanese tatami mat in January. Both music players were twisted out of shape from the heat and became unusable, he said.

The latest problem follows a similar report from the Japanese ministry in March about sparks shooting out of an iPod Nano.

Apple's iPod players are extremely popular in Japan and coveted as fashion items, even though Japanese manufacturers produce a host of iPod rivals.