Five Stocks That Look Enticing Based On Cash Flow

It’s a simple formula, right? A business’s profit equals its revenue minus expenses.

Yet this can be tricky. Some expenses are intangible. Say you’re a cruise company, and bought some ships five years ago, paying out $30 million. You didn’t subtract the whole $30 million from your profits that year. On your books, you spread the expense out over ten years. So this year you will subtract $3 million from your profits, but you’re not laying out any cash. Your cash flow is $3 million higher than your reported earnings.