Life Coaching

Posted on December 19, 2021 by admin

“Crystallize your goals. Make a plan for achieving them and set yourself a deadline. Then, with supreme confidence, determination and disregard for obstacles and other people’s criticisms, carry out your plan.” Paul J. Meyer

Life Coaching is focused on nurturing, advising, building and on win/win for both the coach and the recipient of the coaching. If you are a coach, you are a builder of men and women. It is a grand responsibility and opportunity! It is a chance to postively impact countless people’s lives for the better! It is a chance to become the leader and a builder of men and women you were meant to be!

In Coaching, coaches may discuss the negative thoughts and energy from their client’s in order to assist their client move forward, but they do not analyze, diagnose, or attempt to treat these behaviors or disorders. If these are observed, or concern is raised regarding these areas, the coach’s will encourage the to seek professional counseling.

In Coaching, the coach understands that the client has the answer. Thus, the coach will nudge or partner to help the client discover it. Even though the coach may have had a similar experience, they are not the client, so the coach’s solution may not work for the client. In short, the coach may share her or his experiences to show empathy with the client or to point out possibilities, but there is no premise that is the solution for the client.

Coaches work hard to be objective. Their advice is not influenced by their relationship so advice is not flavored with that in mind. Coaches know from experience and research that people who write down their goals and create an plan of action to reach those goals, are much more likely to achieve what they desire in life.

“Enter every activity without giving mental recognition to the possibility of defeat. Concentrate on your strengths, instead of your weaknesses… on your powers, instead of your problems.” Paul J. Meyer

Paul J. Meyer’s Personal Success Plan proposes you:

Crystallize your thinking. Know what you want. Determine a specific goal, and dedicate yourself to its attainment. You can’t move forward until you know what you’re moving toward.
Develop a plan for achieving your goal and a deadline for its attainment. The first step is to plan. Plan your progress carefully, in small, achievable steps that won’t overwhelm you, and choose a deadline. A time limit is a greater motivator for success than you realize.
Develop a sincere desire for the things you want in life. Develop a sincere desire for those things you want is a motivator for your activity. It’s what pushes you to do what you need to do. Focus on creating a habit of success, and doing what successful people do to have success.
Develop supreme confidence in yourself and your ability. The #1 reason that people aren’t as successful as they want to be, is because they lack confidence in themselves. Concentrate on your strengths, focus on your power. Remember what you’re good at, and focus on it. Ignore the rest.
Develop a “dogged determination” to follow through on your plan regardless of obstacles, criticism, or circumstances or what other people say, think, or do. “Construct your determination with sustained effort, controlled action, and concentrated energy. Opportunities never come to those who wait, they’re captured by those who dare to attack”, states Paul J. Meyer

“Dogged determination” can be called, “Guts, Courage, a Raw Refusal to Quit.”

90% of all failure comes from quitting. As a result, the secret to success lay in the fact that you must refuse to Quit!

Focus your confidence and desire on your strengths and power and against the mental enemies (the 5 de-motivators of… fear, doubt, worry, indecision, and negative thinking). We like to make excuses and say we can’t do it, but that’s exactly what holds us back from reaching our potential.

Pay attention to your self-talk. Are you telling yourself that you’ll be successful? Are you telling yourself that you can do it? Do you believe that you will accomplish your goals? When you can overcome that self-defeating, degrading self-talk, tremendous things will happen.

If you are experiencing negative thoughts or any negative emotions it’s usually because you are focusing on – – fear, doubt, worry, indecision and negative thinking.

Attitude is everything! Attitude is a habit of thought and a conscious choice. Who you are now is a function of specific choices that you have made and habits you’ve embraced. You are where you are and what you are because of the dominating thoughts that occupy your mind and habits that dominated your day. You have the power to change, to be, and to do anything … so use it!

They want to do business with me.
I got what it takes!
I do all things through Christ who strengthens me! Christ is my Savior and Lord of my life.
Anyone can become financially independent and free.

Coaches help clients create healthy and effective habits, not restrictions!

References:

Wealth Blueprint

Posted on December 19, 2021 by admin

If building wealth and financial freedom are your destination, the journey always starts with your financial mindset, attitude and habits. Jeff Hayden

T. Harv Eker, author of “Secrets of the Millionaire Mind”, is convinced that anyone can be build wealth and become financially free. But, he opines that what holds most people back from accumulating wealth is an internal mental script or “money blueprint” that tells them that they can’t or shouldn’t.

In his bestselling book, Eker teaches people to identify their internal money blueprint and revise them. However, many critics rightfully argue that his focus on personal psychology as the sole driver of success ignores very real economic and systemic factors such as inequality, sexism and racism which can be possible determinants of one’s income bracket and net worth.

“If your subconscious “financial blueprint” is not set for success, nothing you learn, nothing you know and nothing you do will make much of a difference.” T Harv Eker

Yet, Eker argues that you have a personal wealth blueprint already ingrained in your subconscious mind that will determine your financial life and overall success. What he means is that you can know everything about saving for the future, investing to grow your money, and accumulating wealth, but if your subconscious wealth blueprint isn’t preset to a high level of life and financial success, you will never amass a large amount of wealth or achieve financial freedom.

What people have to realize is that we are all subconsciously taught and conditioned in how to deal with money and wealth, according to Eker. Unfortunately, many of us were taught by family members and acquaintances who didn’t own a lot of assets and did not have a lot of money, so their way of thinking about wealth became your natural and automatic way to think. And since you are a creature of habit, your internal thoughts and beliefs about wealth and money will determine your external results of net worth and cash flow.

“If you want to change your results, you have to start by changing your thoughts.” T. Harv Eker

Your wealth blueprint single-handedly, according to Eker, determines your financial life, because your thoughts lead to feelings, which lead to actions, which lead to your results. Thought is the ‘Mother of all Results’. It’s about a process of manifestation, that your thoughts lead to your feelings, which lead to your actions, which lead to your results.

Thoughts → Feelings → Actions → Results

The reason you think the way you do about money is conditioning. You were taught how to think about money. You weren’t born with money thoughts and beliefs. You learned them. You were conditioned around money, success, and wealth by:

Verbal programming – what you’ve heard,
Modeling – what you’ve seen,
And specific incidences and experiences you’ve had.

No personal wealth mental blueprint is true or false or right or wrong, says Eker. It’s just how you’ve been programmed. Some people are savers. Others are spenders.

There are several important question to ask yourself: What is your current wealth and success blueprint, and what results is it subconsciously moving you toward? Are you set for working hard for your money or are you set to have your money work hard for you? Are you programmed for saving money or for spending money? Are you programmed for managing your money well or mismanaging it?

Bottomline, your wealth blueprint, meaning your thoughts and beliefs, will determine ultimately your financial life and net worth – and can even determine your personal life, according to Eker.

“The vast majority of people simply do not have the internal capacity to create and hold on to large amounts of money and the increased challenges that go with more money and success. That, my friends, is the primary reason they don’t have much money.” T. Harv Eker

References:

5G Wireless Spectrum Aviation Dispute

Posted on December 18, 2021 by admin

Six former chairs of the U.S. Federal Communications Commission (FCC) — Ajit Pai, Tom Wheeler, Julius Genachowski, Michael Copps, Michael Powell and Mignon Clyburn — urged the Biden administration to resolve a dispute over the planned use of 5G wireless spectrum that the aviation industry says poses an air safety risk, according to Reuters.

Major U.S. air carriers warned that plans by wireless carriers such as AT&T and Verizon to use C-Band spectrum for 5G wireless services starting January 5, 2022, could disrupt thousands of daily flights and cost air passengers more than a billion dollars annually in delays. United Airlines Chief Executive Officer Scott Kirby warned that the 5G spectrum use “could delay, divert or cancel about 4% of daily flights and impact hundreds of thousands of passengers”.

The aviation industry and the Federal Aviation Administration (FAA) have raised concerns about potential interference of 5G with sensitive aircraft electronics like radio altimeters. The FAA has issued directives for airlines to revise airplane and helicopter flight manuals to prohibit some operations requiring radio altimeter data when in the presence of 5G C-Band wireless broadband signals.

And, the FAA plans to issue further notices to airlines offering more detail on the potential interference and is in discussion about which altimeters could be used under the current mitigation plans.

The Biden administration wants eagerly to resolve the issue and has urged airlines to work with the wireless carriers to reach agreement. United’s Kirby has said that the FCC and FAA “need to get in a room and talk to each other and solve the problem,” adding that the issue “cannot be solved on the back of airlines.”

However, wireless carriers have shown no interest in further delays to using the spectrum. Verizon has said that “there is no evidence that 5G operations using C-band spectrum pose any risk to aviation safety, as the real-world experience in dozens of countries already using this spectrum for 5G confirms,” and added it was confident the FAA ultimately will conclude C-Band 5G use “poses no risk to air safety.”

References:

Long Term Investing

Posted on December 17, 2021 by admin

“No matter what the market is doing, no matter how it’s performed, there is always a smart-sounding excuse to sell that is very often regrettable in hindsight.” Motley Fool

Over the past century, research continues to demonstrate that staying invested in stocks over the long term has consistently outperformed every other investing strategy. Since, you can’t predict (or time the market) with certainty and you can’t meet long-term goals with short-term investment strategies.

Stocks have outperformed most assets such as bonds, real estate and cash, over the long run. Ideally, anyone with more than 10 years to invest would buy stocks at good prices and exercise patience. Stocks return 7% to 9% a year over the long run — better than any other asset class. But that can be misinterpreted to imply that stocks return 7% to 9% every year. While the long-term average annual return works out to 7% to 9% a year, what happens in between is wild and chaotic.

Investing is just a fancy word for making your money work for you!

Taking an appropriate amount of market risk is necessary because it’s difficult to meet long- term goals with only short-term investments.

It is widely accepted that there are risks of losing your hard earn money money when you invest in stocks, bonds and mutual funds. However, what is less well known and not widely discussed are the greater risks in not investing in assets. Over time, cash loses purchasing power and value.

Yet, in December 2020, households were holding about $16 trillion in cash, according to Motley Fool. Having this much cash on the sidelines is risky. By not investing your money and keeping it in cash will certainly result in your money losing purchasing power due to inflation and may result in you not achieving your long-term financial goals by having money sit on the sidelines.

Ultimately, it’s important to remember your long term financial goals, why you’re investing and to understand the risks of not investing.

According to investing guru Jeff Gundlach, the single biggest reason why most retail investors fail is simple: Their money flows in and out of assets at exactly the wrong time — in just when things are expensive, and out just as they’re cheap. “Volatility scares enough people out of the market to generate superior returns for those who stay in,” Wharton professor Jeremy Siegel explains.

There’s simply too much uncertainty, and no one can accurately predict or time the market. To successfully time the market, it requires a level of precision that nobody’s been able to achieve. Always remember, only a small number of days provide a huge proportion of total growth. Missing them can completely derail your long-term performance.

Bottomline, you should be invested should be in the stock market right now. And, the best way to build wealth is to be invested in stocks, stay invested, and not get scared out because of temporary fears and market volatility.

“The single biggest reason why most investors fail is simple and widespread: Money flows in and out of assets at exactly the wrong time — in just when things are expensive, and out just as they’re cheap.” Morgan Housel

References:

2021 Women and Investing Study | Fidelity Investments

Posted on December 16, 2021 by admin

More women than ever are taking a seat at the investing table, according to Fidelity Investments.

Fidelity Investments’ 2021 Women and Investing Study was conducted “to gather insights into women’s attitudes and behaviors when it comes to managing their finances” and investing for the long term. The study findings show:

67% of women are now investing outside of retirement
50% of women say they are more interested in investing since the start of the pandemic
42% say they now have more to invest since the start of the pandemic

When women do decide to invest, they are realizing positive results and returns. Analysis of more than 5 million Fidelity customers over the last ten years finds that, on average, women tend to outperform their male counterparts by 40 basis points or 0.4%.

While these investing trends by women are encouraging, still only 1/3 of women see themselves as investors, and additionally:

Only 42% feel confident in their ability to save for the long term, including retirement

Only 33% feel confident in their ability make investment decisions

Only 35% feel confident their non-retirement savings are invested appropriately

Only 14% of women say they know a lot about saving and investing

Overall, women feel less confident when it comes to long-term financial planning and investing to grow their money and build wealth, according to Fidelity Investments.

Women who set financial goals, create a financial plan and take the following additional actions feel more confident in their ability to save for the future and make investment decisions to help their savings grow:

Determine current financial status (net worth and cash flow)
Pay themselves first, automate their savings and invest consistently a portion of every paycheck
Select diversified investments like stocks, bonds, mutual funds or ETFs
Take a long-term approach to investing
Starting early and track progress regularly
Making time to educate themselves about personal finance topics

Bottomline, 64% of women surveyed by Fidelity said that they would like to be more active in their finances, including investment decisions. Not surprisingly, the factors that holds them back include:

70% of women say to invest they would need to know more about picking individual stocks.
65% of women say they’d be more likely to invest, or invest more, if they had clear plan or steps to do so.

It’s never too late for you to get started setting financial goals, creating a financial plan and investing for the long term.

References:

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/about-fidelity/FidelityInvestmentsWomen&InvestingStudy2021 .pdf

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Calculating Net Worth

Posted on December 11, 2021 by admin

Calculating net worth involves adding up all your assets and subtracting all your liabilities. The resulting sum is your net worth.

The value of your primary residence is not included in your net worth calculation. In addition, any mortgage or other loan on the residence does not count as a liability up to the fair market value of the residence. If the loan is for more than the fair market value of the residence (i.e., if your mortgage is underwater), then the loan amount that is over the fair market value counts as a liability under the net worth test.

Further, any increase in the loan amount in the 60 days prior to your purchase of the securities (even if the loan amount does not exceed the value of the residence) will count as a liability as well. The reason for this is to prevent net worth from being artificially inflated through converting home equity into cash or other assets.

The following table sets forth examples of calculations under the net worth test for being an accredited investor:

Accredited Investor table

References:

Believe in Yourself and Know What You Want

Posted on December 7, 2021 by admin

“If you don’t know what you want, it’s difficult—often impossible—to create or to get what you want in life.” Paul J. Meyers

People generally think they know what they want, but in practice, they do not. Generally, they don’t know what they really want in life or want to do. Additionally, they don’t know where to start, don’t have a plan, and don’t where to look for help to change that.

American author Mark Twain said he could teach anyone how to get what they want; he just couldn’t find anyone who truly knew what they wanted. Being unclear on what you want is one of the biggest stumbling blocks to getting what you want and success. Paul Meyer, founder of Success Motivation Institute, says if you’re not achieving the success you desire, it’s simply because your objectives are not clearly defined. Your goals need to be written, specific and measurable.

Hundred of thousands of people live there lives without purpose or goals. If you don’t want to spend your life wandering aimlessly, you should dedicate your waking hours determining exactly what you want in life and making plans to achieve those goals.

Knowing what you want.

If you don’t know what you really want in life, you’re not alone. While most people may think they know what they want, they’re often wrong.

Positive mindset, attitude and focus are vitally important attributes. The attributes are required to reach your goals and to realize your dreams. Thus, you should have a real understanding that you are responsible and capable of creating your reality regardless of the various obstacles you might encounter along the way. According to Inc. Magazine, here are six steps to help you achieve what you want:

1. Make a decision to have what you want, even if you don’t know how to get it. Most people are tentative when it comes to being specific. Instead, be confident in declaring what you want and be comfortable with the fact that you don’t yet have a plan, but you do know what you want.

2. Be clear about the details of the outcome. You should focus on what you do want, not what you don’t want. Practice visualizing yourself in the situation you want to create. You must be clear about what you want, like financial freedom, finding the perfect partner or a happy life. You must imagine the look, feel and sound of the perfect situation for you in your life.

3. Detach from the process. Not knowing “how” to do something holds many people back. The “how to do it,” instructions will appear after you have clearly defined what you want.

4. Believe in yourself and expect that it will happen. You need to believe in yourself and in the creative process. Winners expect to win. A shortage of belief causes many people to give up or never begin in the first place. Believe and set an expectation that what you want will, in fact, appear. It may not appear in the way you thought or at the precise time. You may even experience frustration, anxiety or impatience trying to control the outcome.

“When you believe in yourself, others tend to believe in you.” Paul J. Meyers

5. Be open to possibility when things don’t go your way. The path to the outcome may show up in ways you never imagined before. Suspend judgment of how things should be done and consider that the very thing you think is a deterrent may be the very thing you need to get what you want. Many times, people, circumstances and resources will show up, but you’ll miss the connection. This is where not knowing how, while keeping your eye on the goal, is important.

6. Practice gratitude. Be thankful for the things you have in your life right now. Look at your challenges as opportunities to grow. When you practice being thankful for specific events in your life, even when you don’t understand why they appear in your life, your ability to manifest accelerates almost to the speed of thought.

Getting what you want is not always simple and easy. Challenges, emotions, other people’s negative views and comments can set you back. But in the end, it all comes back down to your choice, commitment, effort and most of all…attitude. It’s essential to choose what you want, believe in your abilities, trust the process, have faith that it will happen and embrace the right attitude.

That is why “attitude is everything”.

“Attitude is everything,” according to Meyers. “It doesn’t matter where you are or what you’re doing, it all has to do with attitude. And then I have an I will-not-be denied attitude. And that’s an incredible thing to have. I don’t look to my weakness; I look to my strength. I don’t look to my problems; I look to my power. It’s all about attitude.”

“When winners choose a goal, their commitment to achieving it is firm and steadfast,” says Meyers. “When winners are confronted with hurdles or run into stumbling blocks, they go over them or turn them into stepping stones. Winners pursue their goals persistently until they succeed.”

Every day, you should strive for increased clarity around your goals and knowing what you really want. Having clarity about what you want keeps you moving toward it.

References:

Determining Your Net Worth

Posted on December 6, 2021 by admin

Net worth is the most important number in personal finance and represents your financial scorecard.

What Exactly Is Net Worth?

Net worth is what you own minus what you owe. Or, you can think of net worth as everything you own less all that you owe. “Net worth is what’s yours, really yours. First, add up the value of everything you own, then subtract the total amount of any debts that you have. What’s left is your net worth”, explained Robert LeFevre Jr., a certified public accountant and certified financial planner.

Calculating your net worth requires you to take an inventory of what you own, as well as your outstanding debt. And when we say own, we include assets that you may still be paying for, such as a car or a house. Start with what you own (assets): cash, retirement accounts, investment accounts, cars, real estate and anything else that you could sell for cash. Then subtract what you owe ( liabilities]: credit card debt, student loans, mortgages, auto loans and anything else you owe money on. Then boom—you’ve got your net worth.

The average net worth for U.S. families is $748,800. The median — a more representative measure — is $121,700, according to the Federal Reserve Board’s Survey of Consumer Finances.

Financial planners point out that the actual value of your net worth is less important than its growth over time. Tallying up your net worth every three to six months can help keep you on track and alert to potential problems.

Assessing Your Assets

Start with what you own — your assets. The biggest ones might be your home and your car. You will want to write down your best estimates of what these items would sell for today rather than their original purchase prices. Add in other big-ticket items you own — a motorboat, shop machinery, musical instruments, jewelry, art and any other objects worth $500 or more. Next, add in your financial assets, such as cash, bank accounts, certificates of deposit, brokerage accounts, individual retirement accounts and any other investments. The tally represents your total assets.

Listing Your Liabilities

Liabilities are what you owe. Start with your biggest debts first. Your mortgage balance and remaining student loans might top the list. You also may be paying off one or more vehicles. Next, add in your current balances for credit cards, revolving home improvement loans and other types of consumer debt. Finish up with any medical bills, liens, court judgments or back taxes that you currently owe. Figure the sum of all your liabilities, and then subtract it from your assets, giving you your net worth.

What the Number Means

Net worth is the value of the assets a person owns minus the liabilities they owe.

When it comes to net worth, it’s not the number, but rather what you do with it that matters most. If you have a negative net worth, you’ve already taken a great first step by identifying the problem. Net worth is one way to check your financial well-being and spot strengths and weaknesses.

By inspecting your debts, you can develop ideas to modify your spending habits. Your list of assets will help show you if you need to increase your savings and investments. Most of all, be realistic with your numbers — an accurate number is a lot more valuable than a “feel good” one.

Examine the trend of your net worth over time. If it’s not growing as fast as you would like, consider putting together a budget that will help get you moving in the right direction. The payoff will come when you find you have enough net worth to do the things that are important to you, such as traveling or engaging in hobbies that were once too expensive to afford.

There are many tactics you can use to build net worth. Start with a few basic steps:

Choose a debt payoff strategy. Create a plan for shedding burdensome liabilities. We recommend paying down debts with the highest interest rates first, an approach known as the debt avalanche. Another option you may consider is debt consolidation: rolling multiple debts into one payment.
Grow your money. Set up automatic savings, take advantage of competitive account interest rates and explore other ways to build wealth.
Be patient. The trend for most people is that net worth increases as they get older. Do your best to get on the right track and allow time for your efforts to pay off.

Your income is not included in a net worth calculation. Although, a drop in income can impact your net worth, which is essentially a calculation of all of a person’s assets — including cash in checking and savings accounts, minus liabilities.

A person can earn a big paycheck but have a low net worth if they spend most of the money they earn. On the other hand, even people with modest lifetime incomes can accumulate significant wealth and a high net worth if they buy appreciating or income producing assets and are prudent savers.

References:

Successful Investors and Financial Literacy

Posted on December 5, 2021 by admin

Investing is all about: Putting your money to work for you making more money.

One of the most glaring failures in the U.S. K-12 education system is the lack of even basic education in the areas of personal finance, budgeting, saving and investing. We’re becoming a nation in crisis with regard to our schools’ failure to prepare and educate K-12 students in personal finance and decision-making.

Financial illiteracy is an American epidemic and the crisis is growing, according to the non-profit American Public Education Foundation’s national report card on K-12 personal financial education: Vision 2020 Financial Literacy Report Card, 2019-2020. The 50-state review points to a nation in crisis with regard to our schools’ failure to prepare and educate K-12 students in personal finance and decision-making.

“America is facing a growing epidemic,” observed David A. Pickler, J.D., CFP®, ChFC®, CDFA®, an award-winning wealth advisor and education leader and one of Financial Times’ 400 Top Advisors. “Our nation is rapidly sinking into a sea of debt and financial dependency. We have created a collective culture where it is acceptable to pursue bankruptcy as a solution to irresponsible financial behavior and decision making. Each of us has a responsibility to change this culture, to become accountable partners in preparing our children to make sound financial choices, or face the consequences that will undermine America’s future and threaten our economic and national security interests.”

According to The Aspen Institute, 16% of suicides in the US occur in response to a financial problem. Further, a USA TODAY report states that less than one-fourth of young Americans ages 18 to 26 are “very optimistic” about their financial futures.

Financial literacy

One of the most successful traders in history once remarked, “If I’d only been taught in high school what I later managed to learn on my own about investing, I likely could have retired wealthy by age 35.”

Anyone can potentially reap massive financial benefits from simply taking the time to learn the basics about investing as early as possible in life. It’s not too late to begin building a fortune through investing, and the sooner you start, the sooner you’ll achieve your financial dreams.

There are two truths:

Taking the time to acquire investing knowledge and skills, whether at sixteen or sixty, will put you well ahead of your peers in terms of financial literacy and in terms of financial success.
An important “secret” about investing and wealth – “You can make a lot more money a lot faster by sending your money to work for you every day, rather than just sending yourself to work every day.”

The best, most successful investors are continually learning and continually honing and expanding their skills at making money in the financial markets.

Stocks, also known as equities, represent fractional ownership in a company, asset, or security. The stock market is a place where investors can buy and sell ownership of such investable assets.

References:

Price-to-Free Cash Flow Ratio (P/FCF)

Posted on December 4, 2021 by admin

Free Cash Flow (FCF) – The cash left after making investments in capital assets

The price-to-free cash flow ratio (P/FCF) is a valuation method used to compare a company’s current market share price to its per-share free cash flow.

Free cash flow (FCF) measures a company’s financial performance. It measures how much cash a business can generate after accounting for capital expenditures such as buildings or equipment. In other words, FCF measures a company’s ability to produce what investors care most about: cash that’s available to be distributed in a discretionary way.

FCF is calculated with the formula below:

Free Cash Flow = Operating Cash Flow (CFO) – Capital Expenditures

Most information needed to compute a company’s FCF is on the cash flow statement. As an example, let Company A have $22 million dollars of cash from its business operations and $6.5 million dollars used for capital expenditures, net of changes in working capital. Company A’s FCF is then computed as:

FCF = $22 – $6.5 = $15.5m

Free cash flow relies heavily on the state of a company’s cash from operations (CFO). The cash from operations deals with the cash inflows and outflows directly related to the company’s primary activity: selling a good or service. Cash from operations is heavily influenced by the company’s net income (excluding depreciation).

The presence of free cash flow indicates that a company has cash to expand, develop new products, buy back stock, pay dividends, or reduce its debt. High or rising free cash flow is often a sign of a healthy and growing company that is thriving in its current environment.

For investors, free cash flow measures a company’s ability to generate cash, which is a fundamental basis for stock pricing. This is why some people value free cash flow more than just about any other financial measure out there, including earnings per share or book value per share.

Investors should understand that companies can manipulate their free cash flow by lengthening the time they take to pay the bills (preserving their cash), shortening the time it takes to collect what’s owed to them (accelerating the receipt of cash), and putting off buying inventory (preserving cash). Also, companies have some leeway about what items are or are not considered capital expenditures, and the investor should be aware of this when comparing the free cash flow of different companies.

Since FCF has a direct impact on the worth of a company, investors should hunt for companies that have high or improving free cash flow but low correlated market share prices.

Low P/FCF ratios typically can mean the shares of the underlying company are undervalued. Thus, the lower the P/FCF ratio, the “cheaper” and better value the stock remains.

The best, most successful investors are continually learning and continually honing and expanding their skills at making money in the financial markets.

References:

Brownlee Global: Gratitude to Greatness

Helping People Live the Lives They Want

Category Archives: Financial Planning

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5G Wireless Spectrum Aviation Dispute

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