What are the most effective cash flow metrics for identifying acquisition targets?

I am strongly recommending to dive into Free Cash Flow (FCF): Unveiling a Company's true cash power FCF: What's left after sustaining the business. It's cash generated after accounting for expenses & investments needed to keep running (buildings, machines, etc.). Think of it as "extra cash" for acquisitions, dividends, or debt repayment. Positive FCF: Company creates more cash than needed, good sign for potential acquisition. Negative FCF: Company spends more than it earns, needs attention. Key metric for acquisitions: Shows potential cash contribution & shareholder value creation.

In the deep blue corporate sea, Arabella, the strategic business shark, often relied on Free Cash Flow (FCF) as her sonar for spotting acquisition targets. FCF, the lifeblood of a company, revealed more than mere profitability; it showed how much cash a company could generate after maintaining its oceanic empire. A company with strong, positive FCF was like a thriving coral reef, offering ample resources for growth and investment. Arabella knew that such companies were not only self-sustaining but also capable of enriching her own venture's ecosystem. In the vast ocean of business, FCF was her guiding light in identifying potential treasure troves. Spread Shark Love #divineintervention #gabenfreude

A company's cash flow from operations minus capital expenditures. FCF indicates how much cash a company generates after accounting for reinvestment needs. Strong, consistent FCF allows for flexibility in growth initiatives.

I think that the OCF is the core cash engine of company. ? Measures cash generated from key business activities (sales, payments, etc.). ? Excludes investments & financing activities (think buying assets or raising capital). ? Shows how efficiently revenue turns into cash & working capital management. ? High OCF = good, covers expenses & fuels growth. Low OCF = potential concern. ? Key metric for acquisitions: reflects earnings quality & core cash generation potential.

Arabella, the shrewd business shark, swam keenly through the currents of corporate finance, valuing Operating Cash Flow (OCF) as a crucial metric. OCF, to her, was like the steady flow of a river, indicating the health of a company's core activities. A robust OCF meant a company was not just catching fish but efficiently turning them into sustenance, a sign of a well-managed underwater kingdom. Arabella sought companies with strong OCF, for they were the ones adept at navigating the ebb and flow of business tides, capable of sustaining themselves and contributing to the growth of her empire. In the vast ocean of acquisitions, OCF was her compass, leading her to the most promising shoals. Spread Shark Love #divineintervention #gabenfreude

Measures total cash generated from regular business operations. Steady or increasing operating cash flows signal an efficient and profitable underlying business.

From my opinion, the most challenging for services. CFM is cash per dollar sold. CFM reveals how much cash a company keeps from each sales dollar.

In the vast ocean of business, Arabella, the astute business shark, valued Cash Flow Margin (CFM) for identifying acquisition targets. To her, CFM was like the abundance of plankton in water, showing how much cash a company generated per dollar of sales. High CFM indicated a company efficiently converting sales into cash, signifying a healthy cash conversion cycle. Arabella sought such companies for their profitability and streamlined operations, making them prized targets in her empire's expansion. For her, CFM was a lighthouse, guiding her to the most prosperous reefs in the sea of business opportunities. Spread Shark Love #divineintervention #gabenfreude

Operating cash flow as a percentage of revenue. Comparing a target's cash flow margin to industry benchmarks helps assess quality of earnings.

Arabella, the forward-thinking business shark, closely monitored the Cash Flow Growth Rate (CFGR) to navigate the tides of potential acquisitions. For her, CFGR was akin to the speed of a current, revealing how swiftly a company was enhancing its cash flow. A high CFGR was like a fast-moving stream, signifying a company rapidly expanding its treasure chest and adapting to the ever-changing oceanic market. Such companies, with their fins firmly in future currents, were beacons of potential in Arabella's quest for growth. They promised not only immediate riches but also long-term prosperity. CFGR, in her strategic hunt, was a crucial sonar ping in the deep blue sea of business. #gabenfreude

In the realm of acquisitions, Arabella, the strategic business shark, relied heavily on Cash Flow Return on Investment (CFROI) to assess potential targets. To her, CFROI was like the yield of a bountiful hunt, showing how effectively a company turned capital into cash. A high CFROI symbolized a prosperous sea, where investment bore abundant fruit, reflecting a company's adeptness at navigating the financial currents. Arabella targeted these companies, as they promised not only a good return on investment but also indicated wise capital allocation, key for her venture's long-term prosperity. For her, CFROI was a crucial gauge in measuring the depth and potential of her underwater conquests. Spread Shark Love #divineintervention #gabenfreude