In search of free cash flow – Amazon

Amazon provides investors with three alternative calculations of a free cash flow metric. For 2018 these range from $8.4bn to $19.4bn. In contrast our preferred approach gives a negative free cash flow of $3.4bn. What explains these material differences?

The disclosures by Amazon about its free cash flow measures are good and the calculations go further than many other companies. However, in our view important components are missing. We explain our additional adjustments in respect of leased assets and stock-based compensation.

Continue reading “In search of free cash flow – Amazon”

When cash flows should include ‘non-cash flows’

The problem with cash flow statements is that … they only include cash flows. This may seem odd, given that the purpose of cash flow statements is simply to report cash movements. However, most cash flow analysis is focused on sub-totals and it is here that offsetting flows arising from non-cash transactions become important.

We explain why we believe adjustments to cash flow sub-totals are required and for which transactions you should adjust.

Continue reading “When cash flows should include ‘non-cash flows’”