Question

When analyzing a company's cash flow statement, which section of the statement (operating, investing or financing)...

When analyzing a company's cash flow statement, which section of the statement (operating, investing or financing) do you believe is the best predictor of a company's future profitability? Why?
Which company do you believe is healthier based on the cash flow statements presented? Provide at least two specific examples from the statements.
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Answer #1

Among the three sections of the cashflow statement, it is the Cash Flows from Investing Activities which which help the user to understand how much cash the business enterprise applied for future. Cash flow form investing includes capex which mainly includes investment in long term assets and business opportunities that are likely to reap benefits in nearest future. It also provides information about proceeds from divestments made.

To understand the financial health of the enterprise on the basis of its cashflow, the user can use Free Cash flows. The bigger the FCFs the better its health. Based on free cashflows, Apple Inc has highest FCFs of around $ 7.2 billion. The next is Microsoft with FCFs of around $ 4.5 billion.

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