The Investors' Library: Free Cash Flow Edition
"Free cash flow is the key to unlocking long-term value in a business, as it provides the resources necessary to fund growth, pay dividends, and buy back stock."
- Michael Mauboussin
This is the 3rd episode of The Investors’ Library. You can find the first two episodes here and here.
If you want to own great businesses, understanding the cash flow statement is key. While no statement is perfect, understanding cash flows gives investors the clearest picture of what's happening in the business.
Here are five resources to teach you about free cash flow. 👇
Articles
What You Need to Know About Free Cash Flow by Compounding Quality
An overview of Free Cash Flow: What is it? How is it calculated? Red flags, things to watch, etc.
Reconciling Net Income to Free Cash Flow by John Rotonti
John lays out how you go from net income to free cash flow. This article will help you understand the various inputs that make up the number.
Videos
Cash Flows Explained by The Plain Bagel
This short video highlights two fictional businesses and how to analyze them based on their cash flows.
Free Cash Flow Explained by Brian Feroldi and Brian Stoffel
This cash flow statement tutorial covers what a cash flow statement is, how to read it, and walks you through an example.
Podcasts
Motley Fool Money: Guide to Financial Statements: 2 of 2 by John Rotonti
John walks listeners through the cash flow statement. I recommend listening with a cash flow statement in front of you.
Extra Credit:
Once you understand Free Cash Flow better, I recommend checking out Aswath Damodaran on YouTube. He is a professor at NYU and is considered a valuation expert. He posts his lectures and tutorials if you want to dig deeper. This one is a good place to start.👇
The Statement of Cash Flows by Aswath Damodaran
What about you? Do you have a favorite resource to share on free cash flow?