
This is the price ratio of cash flow more important than price in this index?
Profit does not include money used for depreciation and depreciation. I think that depreciation and amortization payments are debts and interest. Yahoo Finance Glossary: Redemption: The repayment loan payments. Depreciation: A non-cash expense that provides a source of free cash flow. Amount allocated during the period to amortize the cost acquisition of assets long period during the lifetime of assets. Cash flows: investment, cash flow represents earnings before depreciation and non cash expenses. Sometimes called cash earnings. Cash flow from operations (called funds from operations real estate and other investment funds) is important because it indicates the ability to pay dividends.
Do not be confused by the definitions Yahoo. They arent that great. Here is the definition of secular depreciation and amortization. Amortization: If Company A buys a shirt machine done in 2006 for $ 100, do not spend the $ 100 cost of the machine entirely in 2006. They have to disperse the costs of the machine on the amount of time, you can make shirts for them. Say you have determined that the machine is 10 years. Then, the depreciation would be $ 10 per year 2006-2016. However, this is considered a non-cash cash in your account will not really for this amount each year. In fact, only $ 100 in 2006. However, is the main difference between cash flow and income statement. Amortization: the same thing, but often intangible items. Say that A pharmaceutical company buys a patent from Company B for $ 100. If they determine the patent term is 10 years, spending $ 10 per year in depreciation. But again, is a non-cash expense. To answer your question, it really depends. The problem with P / E is that profit can cover all sorts of creative accounting that may not reflect the true nature of the business. In addition, the fund do not lie not. Cash flow is cash flow. However, it can be misleading when viewed in a vacuum. Consider for example the t-shirt above. In this first year, he probably had a negative cash flow after spending much of his money in buying the machine. However, it says nothing about whether it would be on track to recover the investment over the next 10 years. I hope that helps.
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