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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 / Technology
Wednesday, May 21, 2008
Government Looks to Terminate Cell Fees
FOXBusiness
The government may step in and help cell phone subscribers avoid termination fees for canceling their accounts, according to the Associated Press
The government is negotiating with wireless companies to get rid of exorbitant cancellation fees that can top $175. A proposal has been written to the Federal Communications Commission saying consumers should have the option to cancel their service within 30 days after signing a contract with no penalty, according to AP.
The proposal stands to cap termination fees and reduce them on a month-by-month basis throughout the over the course of a cellular contract, with fees decreasing as the contract continues. Unfortunately, the plan would not serve to eliminate fees altogether, according to the AP.
If the government approves of the agreement, cellular companies would be exonerated in states where they are being sued by customers trying to reclaim their fees. If the agreement was approved by the FCC, states would no longer be able to regulate charges.
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