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Net Free Cash Flow
[edit]Net free cash flow is closely related to the concept of free cash flow in corporate finance. Net free cash flow is a modified measure of net cash flow that is attributable to the equity holders whether or not dividends are paid, or to the debt holders of a corporate entity to service debt. Net free cash flow is generally equal to Net Cash from Operations (NCO) less Capital expenditure ("Capex") less Mergers and acquisitions, as reported on the Statement of Cash Flows. The data source from the Statement of Cash Flows for NCO is the Operating Activities section, and for Capex and Acquisitions is the Investing Activities section. Net free cash flow has particular relevance for dividend cover, also referred to as dividend coverage, given that the relationship between dividends and cash flows may be greater than between dividends and earnings.[1] Mergers and Acquisitions activity includes cash outflows from purchases of businesses, intangible assets and other investments including joint-venture and license, patent and technology-related acquisitions, among other items [2] such that businesses can remain competitive in their industry. Net free cash flow is abbreviated NFCF and may alternatively be referred to as net net cash flow (NNCF) or equity income. Net free cash flow should not be confused with net cash flow and free cash flow in certain definitions. [3]
- ^ Brigham, Eugene F.; Houston, Joel F. (2004). Fundamentals of Financial Management (10th Edition ed.). South-Western.
{{cite book}}:|edition=has extra text (help) - ^ Kennedy, Raoul (2016). Rate-of-Return Analytics. Amazon Publishing, LLC. pp. 87–88. ISBN 9781530465613.
- ^ Hitchner, James (2011). Financial Valuation: Applications and Models. John Wiley & Sons. p. 500.