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Free Cash Flow |
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Explanation of Free Cash Flow. |
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The Free Cash Flow method is an expression of the amount of cash that is available for the stockholders.
Free Cash Flow Calculation
Net Operating Profit - Taxes ------------------------------------------------------ = NOPAT
- Net Investment - Net Change in Working Capital ------------------------------------------------------ = Free Cash Flow
How do corporations earn money?They earn money by operating business units where it manufactures products or provides services. A company generates revenue by selling its products and services to another party. In generating revenue, a company incurs expenses - salaries, cost of goods sold (CGS), selling and general administrative expenses (SGA), research and development (R&D). The difference between operating revenue and operating expense is Operating Income or Net Operating Profit.
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| Jrham - usa | Free Cash Flow | "Simpler method to extract Free Cash Flow is to derive it from the firms Statement of Cash Flow. Using Total Cash from Operations, subtracting Cap Ex and Dividends." |
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Compare with: Discounted Cash Flow (DCF) | Internal Rate of Return (IRR) | Management Buy-out | Cost-Benefit Analysis | Total Cost of Ownership
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