A motley fool article made a statement about free cash flow that I'm hoping someone can explain to me.
Over the past 12 months, Company X generated $600 million in cash while it booked net income of $800 million. That means, it turned 3.0% of it's revenue into FCF. That doesn't sound so great. FCF is less that net income. Ideally, we'd like to see the opposite.
Can someone please explain why he doesn't like that FCF is less than net income and give an example of a case where FCF is greater than net income?
Thanks so much!
Over the past 12 months, Company X generated $600 million in cash while it booked net income of $800 million. That means, it turned 3.0% of it's revenue into FCF. That doesn't sound so great. FCF is less that net income. Ideally, we'd like to see the opposite.
Can someone please explain why he doesn't like that FCF is less than net income and give an example of a case where FCF is greater than net income?
Thanks so much!