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Beyond The Zulu Principle: Extraordinary Profits from Growth Shares by Jim Slater

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6. Cash Flow

Generalising about investment can be dangerous but I can tell you with confidence that shares with excellent cash flow are invariably attractive. The converse is also true – companies which fail to turn their profits into cash are suspect.

There is no more reassuring investment than a good growth share with healthy cash balances and cash flow per share well in excess of EPS. Cash flow is far more difficult to fudge than earnings and for that reason an abundance of it helps to provide a measure of protection against creative accounting, which has been the downfall of many seemingly attractive growth shares.

Many American investors look upon cash flow as the single most important factor in appraising a company. Warren Buffett put ...

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