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

Technology can drive substitution of products or services by, A) Producing ...

A) Producing new and better products or services B) Substitution of require by a related product or service C) Displacing consumer spending into latest unrelated products and

Advantages of divisional structures, Advantages of divisional structures ...

Advantages of divisional structures - Quicker decision making e.g. autonomous divisions do not have the long-winded process of a long chain of command when making competitive d

Discuss the strategic management models, VRC is a family owned business whi...

VRC is a family owned business which has been manufacturing racing cycles for over a century. Over the years, the company has been relatively successful, although its growth has te

What is benchmarking, A technique employed to help with deciding which soft...

A technique employed to help with deciding which software package to select.

Dissemination process to gain commitment, a)  Make measures for evaluating ...

a)  Make measures for evaluating a strategic plan. b)  Make a schedule for executing a strategy plan in an organization. c)   Make appropriate dissemination process to gain comm

Which of the following are recognized implementation methods, Trail and dis...

Trail and dissemination Parallel conversion Direct conversion Phased conversion

Identify and critically analyse fundamental issues r, identify and critical...

identify and critically analyse fundamental issues related to strategic management. Undertake a study that shows clear evidence of synthesis and evaluation

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

What is the net cash flow for each year, Net Present Value (NPV) analysis i...

Net Present Value (NPV) analysis is a method of calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflow and outflow to the

Diagnosis of endometriosis, C.M. is a 28-year-old woman with a long history...

C.M. is a 28-year-old woman with a long history of dysmenorrhea managed for many years with oral contraceptives. She stopped taking the pill 8 months ago in anticipation of becomin

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