Free Cash Flow

Knowledge Center

   

Explanation of Free Cash Flow.


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.


The cost of Capital, taxes and Free Cash flow

To produce revenue a firm not only incurs operating expenses, but it also must invest money in real estate, buildings and equipment, and in working capital to support its business activities. Also, the corporation must pay income taxes on its earnings. The amount of cash that's left over after the payment of these investments and taxes is known as Free cash flow (Free Cash Flow).


The use of Free Cash Flow

Free cash flow (Free Cash Flow method) is an important measurement for shareholders. The cash that remains after the payment of all cash expenses and operating investment required by the firm. It is the money that is available to pay the company's various claim holders, in particular the shareholders.


Book: S. David Young, Stephen F. O'Byrne - EVA and Value-Based Management: A Practical Guide.. -

Book: Aswath Damodaran - Investment Valuation: Tools and Techniques.. -

Book: Steven M. Bragg - Business Ratios and Formulas : A Comprehensive Guide -


Special Interest Group - Free Cash Flow


Special Interest Group (91 members)


Forum - Free Cash Flow  

In the forum section you will find recent discussions within this knowledge area.


  EVA and Free Cash Flow (1 reactions)
What are the differences between EVA and free cash flow (FCF...
 
 
 
 
  Alternate Way to Find Free Cash Flow
A simpler method to extract the Free Cash Flow is to derive ...
 
 
 
 
  Valuation of a Savings And Credit Co-operative Society (SACCO)
In my opinion, the FCF and income cap are not suitable for v...
 
 
 
 

Best Practices - Free Cash Flow

In the best practices section you will find the best forum discussions within this knowledge area.



Expert Tips - Free Cash Flow

In the expert tips section you will find advices from experts within this knowledge area.



Resources - Free Cash Flow

In the Resources section you will find powerpoint presentations, micro-learning videos, articles, news items, etc. within this knowledge area.


Corporate Valuation for Businesses

Corporate Valuation, Book Value, Market Value, Intrinsic Value, Fundamental Value, M&A, VBM, Fundamental Investing...
 

Construction of Free Cash Flows (2)

Calculating Free CF...
 

Construction of Free Cash Flows

Calculating Free CF...
 

Buying the Asset versus Buying the Cash Flows

Understanding the Difference BetweenBuying the Asset versus Buying the Cash Flow...
 
 

News about Free Cash Flow Method


     
 

News about Corporate Earnings


     
 

Videos about Free Cash Flow Method


     
 

Videos about Corporate Earnings


     
 

Presentations about Free Cash Flow Method


     
 

Presentations about Corporate Earnings


     
 

Books about Free Cash Flow Method


     
 

Books about Corporate Earnings


     
 

More about Free Cash Flow Method


     
 

More about Corporate Earnings


     

Compare with: Discounted Cash Flow (DCF)  | Internal Rate of Return (IRR)  |  Management Buy-out  |  Cost-Benefit Analysis  |  Total Cost of Ownership


Return to Management Hub: Decision-making & Valuation  |  Finance & Investing


More Management Methods, Models and Theory

Special Interest Group Leader

You here? Sign up for free


 


About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2019 12manage - The Executive Fast Track. V15.0 - Last updated: 25-6-2019. All names ™ of their owners.