{"product_id":"free-cash-flow-isbn-9780470391754","title":"Free Cash Flow","description":"The purpose of this book is to explain Free Cash Flow and how to use it to increase investor return. The author explains the differences between Free Cash Flow and GAAP earnings and lays out the disadvantages of GAAP EPS as well as the advantages of Free Cash Flow. After taking the reader step-by-step through the author's Free Cash Flow statement, the book illustrates with formulas how each of the four deployments of Free Cash Flow can enhance or diminish shareholder return. The book applies the conceptual building blocks of Free Cash Flow and investor return to an actual company: McDonald's. The reader is taken line-by-line through the author's investor return spreadsheet model: (1) three years of McDonald's historical financial statements are modeled; (2) a one-year projection of McDonald's Free Cash Flow and investor return is modeled. Five other restaurant companies are compared to McDonald's and each other using both Free Cash Flow and GAAP metrics. \u003cp\u003eForeword xv\u003c\/p\u003e \u003cp\u003ePreface xix\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 1 Investing 101 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003ePrice 1\u003c\/p\u003e \u003cp\u003eFree Cash Flow 2\u003c\/p\u003e \u003cp\u003eRisk and Return 3\u003c\/p\u003e \u003cp\u003eThe Return Multiple 4\u003c\/p\u003e \u003cp\u003eReturn and Price 4\u003c\/p\u003e \u003cp\u003eDebt 6\u003c\/p\u003e \u003cp\u003eEquity 9\u003c\/p\u003e \u003cp\u003eDebt versus Equity 11\u003c\/p\u003e \u003cp\u003ePrivate Company versus Public Company 12\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 2 The Accounting Fog Machine 15\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eGAAP: Competing Theories, Matters of Opinion,Political Compromises 16\u003c\/p\u003e \u003cp\u003eGAAP: Accrual Abuse 17\u003c\/p\u003e \u003cp\u003eGAAP: Errors Bred by Complexity 17\u003c\/p\u003e \u003cp\u003eGAAP’S Gap 18\u003c\/p\u003e \u003cp\u003eGAAP EPS: An Incomplete Definition of Financial Performance 18\u003c\/p\u003e \u003cp\u003eGAAP EPS: Investing in an Economic Vacuum 18\u003c\/p\u003e \u003cp\u003eEBITDA is Not a Cash Flow Metric 19\u003c\/p\u003e \u003cp\u003eThe GAAP Cash Flow Statement 19\u003c\/p\u003e \u003cp\u003eBeware the Balance Sheet 20\u003c\/p\u003e \u003cp\u003eLiquidity 21\u003c\/p\u003e \u003cp\u003eFixed Assets and Depreciation 21\u003c\/p\u003e \u003cp\u003eLeverage and Debt Service 22\u003c\/p\u003e \u003cp\u003e\u003ci\u003eWhose\u003c\/i\u003e Return on Equity? 22\u003c\/p\u003e \u003cp\u003eThe Notes 23\u003c\/p\u003e \u003cp\u003eWhen Do Accruals Meet Cash Flows? 23\u003c\/p\u003e \u003cp\u003eWhat is to be Done? 24\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 3 Free Cash Flow 25\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eReconciliation of Net Income and Free Cash Flow 25\u003c\/p\u003e \u003cp\u003eFree Cash Flow versus Net Income 27\u003c\/p\u003e \u003cp\u003eA Universal Definition? 28\u003c\/p\u003e \u003cp\u003eAcademic Research and the Discounted Cash Flow Model 29\u003c\/p\u003e \u003cp\u003e\u003ci\u003eBarron’s\u003c\/i\u003e Rankings 30\u003c\/p\u003e \u003cp\u003eBuy-Side Users 31\u003c\/p\u003e \u003cp\u003ePrivate Equity Firms 31\u003c\/p\u003e \u003cp\u003eWarren Who? 31\u003c\/p\u003e \u003cp\u003eA Vast Media Conspiracy? 32\u003c\/p\u003e \u003cp\u003eFASB Staff Findings 32\u003c\/p\u003e \u003cp\u003eFAS 95: A Cruel Rule 33\u003c\/p\u003e \u003cp\u003eEPS Misses: The Real Deal 33\u003c\/p\u003e \u003cp\u003eAn Alternative to the Government Number 34\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 4 The Free Cash Flow Statement 35\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eBuilding the Free Cash Flow Statement 35\u003c\/p\u003e \u003cp\u003eFour Key Questions 40\u003c\/p\u003e \u003cp\u003eRevenues 41\u003c\/p\u003e \u003cp\u003eOperating Cash Flow 43\u003c\/p\u003e \u003cp\u003eΔ Working Capital 44\u003c\/p\u003e \u003cp\u003eCapex 45\u003c\/p\u003e \u003cp\u003eCapex: Magnitude and Risk 46\u003c\/p\u003e \u003cp\u003eCapex and Capital 47\u003c\/p\u003e \u003cp\u003eCapex Transfer 48\u003c\/p\u003e \u003cp\u003eCapex Visibility 48\u003c\/p\u003e \u003cp\u003eCapex and Investor Return 49\u003c\/p\u003e \u003cp\u003eFree Cash Flow 49\u003c\/p\u003e \u003cp\u003eFree Cash Flow Yield 50\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 5 Free Cash Flow Deployment 53\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eAcquisitions 54\u003c\/p\u003e \u003cp\u003eBuybacks 56\u003c\/p\u003e \u003cp\u003eDividends 59\u003c\/p\u003e \u003cp\u003eDebt 60\u003c\/p\u003e \u003cp\u003eProjecting Investor Return 61\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 6 The Free Cash Flow Worksheet 65\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eWorksheet Features 66\u003c\/p\u003e \u003cp\u003eEntering Historical Data 68\u003c\/p\u003e \u003cp\u003eAdjustments to GAAP Cash Flow 68\u003c\/p\u003e \u003cp\u003eOperating Cash Flow 71\u003c\/p\u003e \u003cp\u003eCapex 71\u003c\/p\u003e \u003cp\u003eFrom the Balance Sheet 72\u003c\/p\u003e \u003cp\u003eThe Free Cash Flow Statement 73\u003c\/p\u003e \u003cp\u003eGAAP Data 74\u003c\/p\u003e \u003cp\u003ePercentages 75\u003c\/p\u003e \u003cp\u003ePer Share Data 76\u003c\/p\u003e \u003cp\u003eIncremental Data and Company’s Reinvestment Return 77\u003c\/p\u003e \u003cp\u003eCash Sources and Deployments 78\u003c\/p\u003e \u003cp\u003eAcquisitions 80\u003c\/p\u003e \u003cp\u003eBuybacks 80\u003c\/p\u003e \u003cp\u003eDividends 81\u003c\/p\u003e \u003cp\u003eDebt 82\u003c\/p\u003e \u003cp\u003eOperations 82\u003c\/p\u003e \u003cp\u003eProjecting Free Cash Flow 83\u003c\/p\u003e \u003cp\u003eProjecting Cash Sources 86\u003c\/p\u003e \u003cp\u003eProjecting Acquisitions 87\u003c\/p\u003e \u003cp\u003eProjecting Δ in Share Value Due to Δ in the Number of Shares 88\u003c\/p\u003e \u003cp\u003eProjecting Investor Return from Dividends 90\u003c\/p\u003e \u003cp\u003eProjecting Δ in Share Value Due To Δ in Debt 91\u003c\/p\u003e \u003cp\u003eProjecting Δ in Share Value from Operations 94\u003c\/p\u003e \u003cp\u003eGAAP Data, Percentages, and Per Share Data 94\u003c\/p\u003e \u003cp\u003eIncremental Data and Company’s Reinvestment Return 95\u003c\/p\u003e \u003cp\u003eInvestor Return Projection 96\u003c\/p\u003e \u003cp\u003eReturn Multiple 98\u003c\/p\u003e \u003cp\u003eAdding Periods to the Worksheet 100\u003c\/p\u003e \u003cp\u003eUsing the Worksheet 100\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 7 Six Companies 101\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eRevenues 102\u003c\/p\u003e \u003cp\u003ePercentage Change in Revenues 102\u003c\/p\u003e \u003cp\u003eOperating Cash Flow Margin 103\u003c\/p\u003e \u003cp\u003eCapex as a Percentage of Revenues 105\u003c\/p\u003e \u003cp\u003eFree Cash Flow Margin 106\u003c\/p\u003e \u003cp\u003eFree Cash Flow Per Share 107\u003c\/p\u003e \u003cp\u003eThe Government Number 109\u003c\/p\u003e \u003cp\u003eNet Nonworking Capital Items 109\u003c\/p\u003e \u003cp\u003eMcDonald’s 111\u003c\/p\u003e \u003cp\u003ePanera Bread 113\u003c\/p\u003e \u003cp\u003eApplebee’s 114\u003c\/p\u003e \u003cp\u003eP. F. Chang’s Bistro 115\u003c\/p\u003e \u003cp\u003eCheesecake Factory 116\u003c\/p\u003e \u003cp\u003eIHOP 118\u003c\/p\u003e \u003cp\u003eThree Musketeers without New Unit Capex 121\u003c\/p\u003e \u003cp\u003e\u003ci\u003eWhose \u003c\/i\u003eReturn on Equity? 121\u003c\/p\u003e \u003cp\u003eSell-Side Analysts 124\u003c\/p\u003e \u003cp\u003eTotal Returns 125\u003c\/p\u003e \u003cp\u003eTake Your Pick 125\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 8 The CEO and Investor Return 129\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe CEO’s Letter to Shareholders 129\u003c\/p\u003e \u003cp\u003eThe Quarterly Earnings Conference Call 135\u003c\/p\u003e \u003cp\u003eThe CEO’s Incentive Compensation 137\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 9 Finding Great Stocks 145\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Nine Steps 145\u003c\/p\u003e \u003cp\u003eDiversification for Individual Investors 150\u003c\/p\u003e \u003cp\u003eEquity Mutual Funds 151\u003c\/p\u003e \u003cp\u003eFree Cash Flow and Bonds 152\u003c\/p\u003e \u003cp\u003eFree Cash Flow and the Financial Crisis of 2008 152\u003c\/p\u003e \u003cp\u003eAPPENDIX A Equations 153\u003c\/p\u003e \u003cp\u003eAPPENDIX B McDonald’s Income Statement 159\u003c\/p\u003e \u003cp\u003eAPPENDIX C McDonald’s Balance Sheet 162\u003c\/p\u003e \u003cp\u003eAPPENDIX D McDonald’s ROIIC and Weighting 164\u003c\/p\u003e \u003cp\u003eAPPENDIX E McDonald’s ROIIC Calculations 165\u003c\/p\u003e \u003cp\u003eAPPENDIX F Recommended Reading 168\u003c\/p\u003e \u003cp\u003eNotes 171\u003c\/p\u003e \u003cp\u003eAcknowledgments 174\u003c\/p\u003e \u003cp\u003eAbout the Author 175\u003c\/p\u003e \u003cp\u003eAbout the Website 176\u003c\/p\u003e \u003cp\u003eIndex 177\u003c\/p\u003e   \u003cp\u003e\u003cb\u003eGEORGE C. CHRISTY, CFA,\u003c\/b\u003e has more than thirty years' experience in the financial markets. He has served as corporate banker for Fortune 500 and middle market companies, as well as treasurer of a publicly owned telecommunications equipment manufacturer. Christy has a BA from Princeton University and an MBA from the University of Chicago, and holds the Chartered Financial Analyst (CFA) designation. He is a member of the Los Angeles Chapter of Financial Executives International, the CFA Institute, the CFA Society of Los Angeles, the Japan America Society, and the International House of Japan.    \u003c\/p\u003e\u003cp\u003eFor years, GAAP earnings per share was the financial metric of choice for virtually all professional equity investors. However, increasing problems with this approach, combined with a growing appreciation of investment economics, have caused many investors to turn to Free Cash Flow as their primary financial metric. \u003c\/p\u003e\u003cp\u003eEven with the growing popularity of Free Cash Flow, the lack of detailed information in this field has made it difficult for many investors to integrate Free Cash Flow into their daily investment discipline. That's why George Christy—a financial executive and corporate banker with over thirty years of experience—has created \u003ci\u003eFree Cash Flow: Seeing Through the Accounting Fog Machine to Find Great Stocks\u003c\/i\u003e. \u003c\/p\u003e\u003cp\u003eFilled with in-depth insights and practical advice, this reliable resource shows you how analyzing a company's financial performance can put you in a better position to pick winning stocks \u003ci\u003eand\u003c\/i\u003e improve the overall returns of your portfolio. Throughout the book, Christy explains the differences between Free Cash Flow and GAAP earnings, and describes the advantages of Free Cash Flow. He also takes you step by step through the Free Cash Flow Statement\u003csup\u003e®\u003c\/sup\u003e—which focuses on the primary drivers of investor return: revenues, cash operating margin, and use of capital—and illustrates how each of the four deployments of Free Cash Flow can enhance or diminish shareholder return. \u003c\/p\u003e\u003cp\u003eIn order to put the ideas outlined in perspective, Christy applies the conceptual building blocks of Free Cash Flow and investor return to an actual company—McDonald's—and goes line by line through the downloadable Free Cash Flow Worksheet\u003csup\u003e®\u003c\/sup\u003e that integrates the primary components of share value into an investor return model. Five other restaurant companies are compared to McDonald's, and each other, using both Free Cash Flow and GAAP metrics. \u003c\/p\u003e\u003cp\u003eRounding out this detailed discussion of Free Cash Flow, Christy shows you how to assess a CEO's commitment to investor return by analyzing three key sources, and explains how to use the Free Cash Flow Worksheet in your stock search, from finding candidates with screeners to making buy, hold, or sell decisions. \u003c\/p\u003e\u003cp\u003eCash is the essence of shareholder value, and with \u003ci\u003eFree Cash Flow\u003c\/i\u003e as your guide, you'll quickly learn how to use this important metric to find, and profit from, great stocks. \u003c\/p\u003e\u003cp\u003e\u003cb\u003eThe Free Cash Flow Statement\u003csup\u003e®\u003c\/sup\u003e and the Free Cash Flow Worksheet\u003csup\u003e®\u003c\/sup\u003e used in this book and found on its companion Web site (www.wiley.com\/go\/christy) were specifically developed by the author for this book. Be sure to see the detailed Table of Contents on page IX.\u003c\/b\u003e \u003cb\u003e\u003ci\u003eFree Cash Flow\u003c\/i\u003e\u003c\/b\u003e \u003cb\u003egoes where no other investment book has gone before.\u003c\/b\u003e\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47989243019493,"sku":"NP9780470391754","price":58.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9780470391754.jpg?v=1761783348","url":"https:\/\/k12savings.com\/es\/products\/free-cash-flow-isbn-9780470391754","provider":"K12savings","version":"1.0","type":"link"}