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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 / Transportation
Monday, May 05, 2008
Report: United Seeks Merger With US Airways
FOXBusiness
United Airlines’ parent company, UAL Group, is seeking a merger with US Airways, according to a report in the Wall Street Journal.
This follows the failed advances United made to Continental Airlines (CAL) for a similar union, advances that were rejected on April 27.
Talks between United (UAUA) and US Airways (LCC) have been in progress for the last six weeks, according to the report, and a final verdict could happen within the next ten days.
US Airways, the seventh largest airline in the country, is slightly smaller than sixth-ranked United. The pair has reported that a merger would amount to a joint savings of $1.5 billion, according to the report.
As with many of the proposed and finalized airline mergers seen so far in 2008, labor and regulatory concerns pose the biggest stumbling blocks to completing the deal.
Although the recent Delta-Northwest merger formed the world’s largest airline, if United and US Airways combined, that company would be the biggest.
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