The intrinsic value of a business is all of the future free cash flows that

business will generate from now until eternity discounted back to present

value because of the time value. Free cash flow is what drives business growth

free cash flows would drives intrinsic value growth and therefore free cash flow

is what drives compounding which is what we are all looking for in our investments.

I'm Chris Hill and that was Motley Fool's Senior Analyst John Ratante. On last

Saturday show John walked through two of the most important financial statements

that public companies released to shareholders, the income statement and the

balance sheet. This week John ties it all together with the discussion on the

cash flow statement and the delicious information it tells investors.

Remember how I just said net income is the bottom line of the cash flow

statement? Well guess what? Net income the same exact number that's on that

income statement then becomes the top line of the cash flow statement. This is

critical to understand. This is critical. The bottom line of the income

statement, net income, becomes the top line of the cash flow statement.

Okay? Now the cash flow statement has three primary sections. Cash flow

generated from operations, cash flows from investing and cash flows from

financing. Right now we're going to focus on the cash flows from operations

section. It's at the top of the cash flow statement and what happens in this

top section of the cash flow statement, in this cash flow from operations

section of the cash flow statement is we're going to make several adjustments or

what are called reconcilations to get to convert net income into cash flow

...