Company C: Normal

- Okay, we're looking at cash flow data…for four companies,…and using those cash flow data…to determine which one of the companies…we should give a loan to.…We looked at company "A"…and decided probably not.…Company "A" has negative operating cash flow…and hugely negative free cash flow.…We also looked at company "B"…and also turned away company "B" as liquidating.…Collecting cash from selling off its land,…buildings and equipment without replacing them.…No to "A", no to "B".…Now let's look at the cash flow statement…for company "C".…

What's the most important number…in the statement of cash flows?…Answer, operating cash flow.…And for company "C" we see that operating…cash flow is positive $45,000,…that's good.…What's the most important relation…in the statement of cash flows?…Answer, the relation between the magnitude…of operating cash flow…and the magnitude of investing cash flow.…We put those two numbers together…and we call it free cash flow.…The free cash flow for company "C"…is negative $55,000.…That's the positive $45,000 operating cash flow,…