Is Amazon's Free Cash Flow Overstated?

Questions:

• Do analysts understand the definition and meaning of free cash flow [FCF]?
• Do they understand the quality of Amazon’s (AMZN) FCF?
• What is the most meaningful method to compute it?
• Should an increase in Current Liabilities be included in FCF, as is being done by most analysts?

Companies, analysts and investors understand the importance of FCF, but there is no real consensus on the definition FCF and of how to compute it. This allows for different results in the determination of FCF, as it varies depending on the definition used, and these variations will give different conclusions as to the performance of the company. In certain cases, adjustments should be made to the FCF figures so that a quality determination can be made .