自由现金流及价值[外文翻译]

1 外文翻译

Free cash flow and valuation

Material Source:The Analysis and Use of Financial Statements

Author: Gerald I White

The cash flow statement is indented to help predict the firm’s ability to sustain

(and increase) cash from current operation. In doing so, the statement provides more

objective information about:

A firm’s ability to generate cash flows from operating

Trends in cash flow components and consequences of invest and financing

decision Management decision regarding such critical areas as financial policy

(leverage), dividend policy, and investment for growth Neither the statement of cash

flows nor the income statement alone contains sufficient information for decision

making. (See Box 2-2 for some empirical evidence in this respect.) In come

statement and balance sheet data must be combined with cash flows for insights into

the firm’s ability to turn its assets into cash inflows, repay its liabilities, and generate

positive return to shareholders. All three financial statements are needed to value the

firm appropriately.

An important but elusive concept often used in cash flow analysis is free cash

flow. It is indented to measure the cash available to the firm for discretionary used

after making all required cash outlays. The concept is widely used by analysts and in

the fiancé literature as the basis for many valuation models. The basic elements

required it calculate FCF are available from the cash flow statement. In the, however,

the definition of FCF varies widely, depending on how one defines and discretionary

uses.

The basic definition used by many analysts is cash from operations less the

amount of capital expenditures required to maintain the firm’s present productive

capacity. Discretionary uses include growth-oriented capital expenditures and

acquisitions, debt reduction, and payments to stockholders (dividends and stock

repurchase).the larger the firm’s FCF, the healthier it is, because it has more cash

available for growth, debt payment, and dividends.

The argument for this definition is similar to Hick’s argument regarding the

computation of net income, discussed in the previous chapter .if historical cost 2 depreciation provided a good measure of the use of productive capacity; the FCF

would equal CFO less depreciation expense .However, historical cost depreciation is

arbitrary and measure the cost to replace operating capacity only by coincidence.

The obvious alternative to depreciation is the amount of capital expenditures

made to maintain current capacity, excluding capital expenditures for growth .In

practice however, it is difficult to separate capital expenditures into expansion and

replacement components. Lacking better information, all capital expenditures are

subtracted from CFO to obtain FCF.

Subtracting all capital expenditures from CFO to arrive at FCF brings the

definition of FCF closer to the one used in definition of FCF closer to the one used

in finance valuation models .In these models, required outflows are defined as well

as capital expenditures necessary to finance the firm’s growth opportunities .Growth

opportunities are defined as those in which the firm can make “above-normal”

returns .It is difficult to determine a priori the amount of capital expenditures

required to maintain growth and the discretionary portion of these expenditures;

pragmatically, FCF is generally measured as CFO less capital expenditures.

Valuation models do, however, differ as to whether FCF is measured as FCF

available to the firm or as FCF

available to equity shareholders. In the former case, required payments do not

include outlays for interest and debt. In the latter case, they do. Thus, for FCF to the

firm, one cannot use reported CFO (less capital expenditures) because CFO includes

outlays for interest expense. We return to this issue later in this chapter. In Chapter

19, we elaborate on the differing definitions of FCF and their implications for

valuation model.

Relationship of income and cash flows

When periodic financial statements are prepared, estimates of the revenues

earned and expenses incurred during the reporting interval are required. As

discussed in the previous chapter, these estimates require management judgment and

are subject to modification as more information about the operating cycle become

available. Accrual accounting can therefore be affected by management’s choice of

accounting policies and estimates. Furthermore, accrual accounting by itself fails to

provide adequate information about the liquidity of the firm and long-term solvency.

Some of these problems can be alleviated by the use of the cash flow statement in