Investors will want to read a brief article by Marie Leone on this question in CFO Magazine. There are 4 main ways a company can choose to utilize its cash flow. Of course, a company can choose to reduce its debt load in order to preserve or raise its credit rating. Bondholders would certainly agree with this approach, though shareholders would more likely tolerate a higher leverage of net debt to EBITDA (Earnings before interest, taxes, depreciation and amortization). A company can also use its free cash flow to invest in opportunities that are an acceptable combination of growth potential vs. risk. A company can also choose to put some money back in shareholders' pockets by paying out a dividend or by repurchasing its stock.

There is not one single approach that is optimal in all circumstances. What matters most is that a company in fact has a transparent cash management policy in place that factors in the direct relationship between a company's target debt level and its share repurchases. It also matters that investors can find out what the company policy is.

The Home Depot Co. (NYSE: HD) is quickly putting to work the $5 billion of cash it raised through a debt offering. Its board has authorized the immediate repurchase of $3 billion of stock through an accelerated share repurchase agreement.

Home Depot has repurchased $6.7 billion of stock, or 173 million shares, this year. Since 2002, it has purchased more than 450 million, or roughly 19%, of outstanding shares.

Taking into account the $5 billion the company recently raised, it will have about $12 billion of debt on its balance sheet. Home Depot is expected to generate about $11 billion in EBITDA, so annual EBITDA covers total balance sheet debt roughly about 1x -- a tremendously conservative capital structure.

Investors need to hear evidence that the worst is over in same-stores sales decline. The most recent figures were simply awful. When better sales figures are announced, Home Depot stock should soar.