# Free Cash Flow Yield: Definition, Formula, and How to Calculate.

How to Calculate Free Cash Flow Yield

Free cash flow yield is a financial metric that measures the cash flow available to shareholders after all expenses have been paid. It is a ratio of free cash flow to the market value of the company's shares.

To calculate free cash flow yield, you will need to know the company's free cash flow and the market value of its shares outstanding.

Free cash flow is the cash a company generates from its operations after it has paid all of its expenses. To calculate free cash flow, you will need to know the company's net income, depreciation, and amortization expense, and capital expenditures.

The market value of a company's shares outstanding is the number of shares that are traded on the stock market multiplied by the share price.

Once you have all of this information, you can calculate free cash flow yield by dividing free cash flow by the market value of the company's shares outstanding.

Free cash flow yield is a useful metric for investors because it shows how much cash flow is available to shareholders after all expenses have been paid. It can be used to compare different companies or to compare a company's performance over time.

Why is it called free cash flow? Free cash flow (FCF) is a measure of how much cash a company generates after accounting for capital expenditures. This cash can then be used to pay dividends, repurchase shares, or pay down debt.

The term "free" cash flow refers to the fact that this cash is available for shareholders to use as they see fit. It is not tied up in investments or other projects.

FCF is a valuable metric for analysts to use when trying to understand a company's true cash generation power. It is also a good way to compare companies across different industries.

How is cash flow measured? Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a company. Cash flow is measured over a specific period of time, such as a quarter or a year.

There are two types of cash flow: operating cash flow and investing cash flow.

Operating cash flow is the cash flow generated by a company's normal business operations. This includes cash from sales, cash from expenses, and cash from other operating activities.

Investing cash flow is the cash flow generated by a company's investing activities. This includes cash from the sale of investments, cash from the purchase of investments, and cash from other investing activities.

Can free cash flow yield negative? Yes, free cash flow can yield negative results. This happens when a company's operating cash flow is less than its capital expenditures. Negative free cash flow means that a company is spending more cash than it is bringing in, which is not a sustainable situation. Is FCF yield levered or unlevered? Levered FCF yield is the ratio of a company's levered free cash flow to its market capitalization. Unlevered FCF yield is the ratio of a company's unlevered free cash flow to its market capitalization.

### What factors affect free cash flow?

There are several key factors that can affect a company's free cash flow, including:

-Revenue: Obviously, the higher a company's revenue, the more cash it will have available to reinvest in its business or return to shareholders.

-Expenses: Carefully managing expenses is critical to maintaining a healthy free cash flow. Higher expenses will obviously eat into available cash.

-Capital expenditures: Free cash flow can be affected by a company's decision to reinvest in its business through capital expenditures. While these expenditures can be necessary for long-term growth, they can also put a short-term strain on cash flow.

-Debt: The level of debt a company has can also affect free cash flow. Companies with higher levels of debt may have to make interest payments that eat into available cash, while companies with lower levels of debt will have more cash available to reinvest in their business or return to shareholders.