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

Strategy and organization analysis, 1. Describe and analyze the environment...

1. Describe and analyze the environment, strategy, and structure of your organization of choice. It is critical to provide evidence for your analysis. 2. Assess the challenges and

BCG matrix, i want to know the BCG matrix of MCB bank pakistan?

i want to know the BCG matrix of MCB bank pakistan?

Development of an asset management plan, Write a submission to your chief e...

Write a submission to your chief executive officer of your organisation describing a strategy to improve the organisation's assets, their management, and the standard of service wh

Advantages of time study, 1. Output standards are easily convertible into...

1. Output standards are easily convertible into labor costs per unit of output. 2. Output standards facilities scheduling and controlling the flow of production thr

Disadvantages of divisional structures, Q. Disadvantages of divisional stru...

Q. Disadvantages of divisional structures? - As the complexity and diversity of products and markets within the group increase, central coordination by a head office or holding

Topic on training, need to make a memo to company executives explaining why...

need to make a memo to company executives explaining why adequate training is important to the company and how the financial costs can be justified

What are the causes of equipment failures, Question 1: (a) What is vi...

Question 1: (a) What is vibration monitoring? Explain, with examples, how can it be useful in industries. (b) Briefly, explain the sources of contaminants which are comm

Discuss whittington''s four generic approaches to strategy, Question 1: ...

Question 1: What is strategy? Discuss Whittington's four generic approaches to strategy. Which approach would be most suitable to Toyota? Question 2: Research has shown

Factors about transfer pricing, Q. Factors about transfer pricing? ...

Q. Factors about transfer pricing? Does the supplier have a solid track record for delivery e.g. references from other satisfied customers in terms of the quality of servic

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