Free Cash Flow Conversion formula

General
1

I read the The Onveston Letter today, it often has some good content. He discussed Free Cash Flow Conversion. The basic Furmula would be = (Free Cash Flow ÷ Net Income) × 100, where "A high conversion rate indicates that reported profits are backed by actual cash generation". But there are so many scenarios where this is not true. So I would like to hear how you would handle the formula when FCF and/or the Net Income is negative?

Below is a few scenarios I could think of

Scenario FCF NetInc Ratio
1 10 9 1,1
2 9 10 0,9
3 -10 -11 0,9
4 -11 -10 1,1
5 10 -1 -10
6 -10 1 -10
2

The basic formula for accruals is (net income - operating cash flow) / total assets. You want low numbers here -- negative is best, almost essential. This is very similar to the free cash flow conversion in many ways. Both formulas measure the difference between cash flow and net income, and favor companies whose cash flow is significantly greater than net income. The formula for accruals handles negative numbers much better than the free cash flow conversion formula.

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