The column Ahead of the Tape that appeared in the February 13, 2004, issue of The Wall

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The column “Ahead of the Tape” that appeared in the February 13, 2004, issue of The Wall Street Journal states that prudent investors prefer to value firms using free cash flow instead of EBITDA. The article explains that the typical definition of free cash flow is cash flow from operations minus capital expenditure, not EBITDA minus capital expenditure. Discuss these comments.

Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...
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