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Article: Tying free cash flows to market valuation.
- Article from:
- Financial Executive
- Article date:
- May 1, 2002
- Author:
CopyrightCOPYRIGHT 2002 Financial Executives Institute. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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In a companion piece to his article in the last issue, Robert Howell turns his attention to the importance of free cash flows in determining valuations.
Last month, in this magazine, this author argued in Fixing Financial Statements: Financial Statement Overhaul that the traditional formats of the primary financial statements -- income statement, balance sheet, and cash flow statement -- need major redesign to again be useful for meaningful financial analysis, decision-making and value creation.
Since the fundamental objective of a business is to increase real shareholder value, this means increasing the net present value (NPV) of the future stream of ...