P&G uses a measure they call Free Cash Flow Productivity. I’m a little confused by it. They define it as FCF/Net Earnings. I always thought this to be a measure of earnings quality and I’m a little lost on it. I have not seen any other company use this ratio in this way. Does anyone know the meaning of this?
Sometimes companies have their own measures of non-GAAP cash flow. For example IBM defines FCF a little differently than the standard. Here as you noted, this may be a measure of earnings quality that PG thinks is important. It wouldn’t be necessary for other firms to do it as well though.
The important thing is to understand why the firm feels that metric is important to them
dont u juss hate it when ir starts thinking of crafty ways to be graded. NO ty.
sounds like an A/R metric on how fast their earnings are being collected.
I bet Enron had a hilariously low FCF productivity ratio before and after they crashed.
They were just making up earnings … aaaaand no cash