However, its free cash flow, after adding back the non-cash charge of depreciation, working capital changes, and cash payments for interest, tax and fixed assets, could be said to be just 28m. There are three points to consider when conducting free cash flow valuations. It's obvious that MMT's cash flow suffered during 1999 as a low cash tax payment during 1998 caught up with the company the following year. The same, but to a lesser extent, goes for interest paid and receivable. What's owed and what's paid to the lender will usually differ in any given year.
Some businesses take cash up front and only then provide the goods.
Perhaps, but not to the extent that free cash flow measures indicate. Compare post-tax profits to the increase in cash tied up in working capital. That seems unjust, simply on the basis that the company is paid two months after sending out its invoices. Maybe some sort of small valuation adjustment could be made for working capital outflows. Investigating the working capital record of the company and its clientele is a must for investors.