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FINANCIAL MARKET COURSES

Corporate Finance - Measuring Business Performance - Free cash Flow

The ultimate goal of any business is the creation of value for the owners of that business, whether that business is privately held by one owner or is publicly held with a multitude of owners/shareholders. Free cash flow (FCF) is an economically valid business performance measurement tool that can help view value creation within a company. This course will provide you with a firm understanding of how to properly and effectively measure business performance using FCF, thereby providing you with tools to make better business decisions.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Address the shortcomings of net income and some of the more widely used cash flow metrics as measures of business performance

    Describe the use of free cash flow (FCF) as an economically valid business performance measurement tool and how it can help view value creation within a company

    Recast the income and balance sheet statements in order to create a NOPAT statement that reflects the economic operating inflows and outflows and an invested capital statement that represents the economic investment made by the capital contributors

  • PROGRAM CONTENT

    Topic 1: Overview of Performance Management

    Performance Metrics

    Shortcomings of Accounting-Based Performance Metrics

    Traditional Financial Management Framework

    Other Popular Performance Measures & Their Shortcomings

    Topic 2: Free Cash Flow

    Definition of Free Cash Flow

    Free Cash Flow – Details on the Calculation

    Invested Capital

    Relationship Between market Value & Free Cash Flow

    Relationship between Return on Investment and Cost of Capital

    Optimal Investment Horizon

    o Optimal Investment Horizon – Graphical Representation

    o Optimal Investment Horizon – Strategic Implication

    Enhancing Free Cash Flow Over the Long-Term

    o Improve NOPAT for a Given Instrument

    o Increase Investment Where ROI > Cost of Capital

    o Decrease Investment Where ROI < Cost of Capital

    Topic 3: Financial Statement Adjustments

    Financial Statement Adjustments – Overview

    o Bad Debt Accounting

    o Goodwill Impairment

    o Deferred Taxes

    o Unusual Gain/ Loss

    o Depreciation

    o Research & Development (R&D)

    o Deferred revenue

    Note on Adjustments

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    75 Minutes

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