Purchases / Maturities of Marketable Securities

A reader has asked why the Free Cash Flow Worksheet does not include purchases/maturities of marketable securities.
This is my reply:

Many companies have purchase/receipt of short term investments.

The FCF Worksheet ignores them. Think of the cash and marketable securities accounts as one account. Changes in the balance of the sum usually do not materially affect investor return.

The FCF Worksheet does not incorporate everything that is in the financial statements. It focuses on the most important events that affect investor return. But don't hesitate to make any modifications if you prefer a different approach.

You could put the net of the purchases/receipts in the Cash Sources section (if the purchases exceed the receipts you would use a minus sign). I don't do that for the same reason I do not put changes in the cash account in the Cash Sources section: I am more concerned with flows into and out of the company that directly affect investor return and I don't want changes in the cash+marketable securities accounts to muddy the waters. You could also argue that including the changes in cash+marketable securities is double-counting in that the changes are already reflected in the net changes of the other accounts.

I hope this is helpful. In the end you have to do it the way you're most comfortable with.