Long-term investors are often searching for excellent businesses that generate plenty of cash. But how do you find these cash cows? In the video below, Fool contributor Daniel Sparks suggests investors use the ratio of free cash flow to sales. The ratio shows what percentage of every dollar of sales ultimately ends up as free cash flow -- the cash companies can use to pay out dividends, buy back shares, or save for future acquisitions at some point when they make strategic sense.
Fool contributor Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends Apple, Baidu, and Google. The Motley Fool owns shares of Apple, Baidu, Google, and International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.