Free cash flows, Strategic Management

Assignment Help:

Free cash flows can be arrived at by using the following calculation

Operating profit before interest and tax (PBIT)

+                                              Depreciation (if included in operating costs)

-                                              Capital expenditure (investment) on non-current assets

-                                              Taxation

=                                              Operating free cash flow

Free cash flow represents the cash flow which is available to be distributed to holders of both equity and debt. Dividends and interest payments would be ignored when calculating free cash-flow.  To establish a value for a company, free cash flow must be discounted using a cost of capital.

The value of a company or its shares will increase if

  • Free cash flows or dividends paid to shareholders increase
  • The cost of capital or cost of equity falls

The value of a company or its shares will decrease if

  • Free cash flows or dividends paid to shareholders decrease
  • The cost of capital or cost of equity rises

 


Related Discussions:- Free cash flows

Portfolio analysis, In portfolio analysis, the business views its product l...

In portfolio analysis, the business views its product lines and business units as separate investments, each responsible for producing a positive return. These separate investments

What do you understand by the term cultural web, Question 1: (a) What d...

Question 1: (a) What do you understand by the term "cultural web" as referred to organisations? (b) Apply the cultural web concept to Toyota. Discuss whether the cultural we

Discuss the main categories of the matrix, Question: (a) ‘Many organi...

Question: (a) ‘Many organisations are using the internet a tool for survival. Digital firms require new organisational designs and management processes'. Explain how the Por

Ideal mission statement of a business organisation, Question: a) (i) H...

Question: a) (i) How many components are there in an ideal mission statement of a business organisation? (ii) Name these components? b) Using the above named component

Show the dimensions of culture, Q. Show the dimensions of culture ? Di...

Q. Show the dimensions of culture ? Dimensions of culture can help management determine  Leadership style e.g. if 'high power distance' then autocratic management exp

Impact of environmental factors, Political Factors Political stability o...

Political Factors Political stability of parties and their actions like granting etc might also influence the business expansion plans of Bread Talk up to lesser extent in Singa

What does it mean for organizational management, Question 1: Discuss th...

Question 1: Discuss the importance of strategy towards the success of a business, highlighting some of the considerations necessary for successful strategic management. Que

Management, .” Differentiate between corporate mission and strategic vision...

.” Differentiate between corporate mission and strategic vision by taking corporate illustrations

Define relationship b/w company''s strategy & business model, Relationship ...

Relationship Between A Company's Strategy & Its Business Model 1.   Closely associated to the idea of strategy is the model of a company's business model . CORE CONCEPT:

Explain functional strategy, Explain Functional strategy Functional st...

Explain Functional strategy Functional strategy for J plc will be concerned with how the constituent parts of the organisation can effectively deliver the corporate and busin

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd