How Buffett Interprets the Cash Flow Statement

• Capital Expenditures

• Never invest in telephone companies because of big capital outlays 
• Important: company with durable competitive advantage uses a smaller portion of earnings for capital expenditure for continuing operations than those without. 
• To compare capex to net earnings, add up total capex for ten-yr period and compare with total net earnings over the same period 
• Important: if historically using less than 50%, then good place to look for durable competitive advantage. If less than 25%, probably has a competitive advantage.

The Cash Flow Statement Summary Table

Capital Expenditures	historically using < 50% then good place to look for d.c.a. < 25% probably has d.c.a.	Add up total cap exp for ten-yr period and compare w/ total net earnings over period.
Stock Buybacks	indicator of d.c.a. is a history of repurchasing/retiring its shares	Look at cash from investment activities. “Issuance (Retirement) of Stock, Net”

 Read more on the Cash Flow Statement Analysis  on my previous post - http://intelligentinvestor8.blogspot.my/2014/06/cash-flow-statement-analysis.html

Or, take a look on How Buffett read other financial statements:-

• How Buffett Interprets the Income Statement
• How Buffett Interprets the Balance Sheet 
• How Buffett Interprets the Cash Flow Statement

References:-

• Uncovering How Buffett Interprets the Financial Statements - Jae Jun