Free Cash Flow and Financial Management Concepts

Income Statement

Financial statement showing revenues and expenses.

Balance Sheet

Snapshot of a company's assets, liabilities, and equity.

Statement of Cash Flows

Reports cash inflows and outflows over a period.

Free Cash Flow (FCF)

Cash available for distribution after operational investments.

Determinants of Intrinsic Value

Factors influencing a company's true worth.

Weighted Average Cost of Capital (WACC)

Average rate of return required by investors.

Net Operating Profit After Taxes (NOPAT)

Profit after taxes from core operations.

Operating Current Assets

Current assets necessary for daily operations.

Operating Current Liabilities

Current liabilities arising from operational activities.

Net Operating Working Capital (NOWC)

Current assets minus current liabilities for operations.

Total Net Operating Capital

NOWC plus net fixed assets for operations.

Return on Invested Capital (ROIC)

Measure of profitability relative to invested capital.

Economic Value Added (EVA)

Profitability measure after accounting for capital costs.

Market Value Added (MVA)

Difference between market value and book value.

Corporate Taxes

Taxes imposed on corporate profits.

Individual Taxes

Progressive tax rates applied to individuals' income.

Taxable Bonds

Bonds subject to federal taxes on interest.

Tax Exempt Bonds

Bonds exempt from federal income taxation.

Breakeven Tax Rate

Tax rate at which bond choices are indifferent.

After Tax Interest Payment

Interest payment adjusted for tax impact.

Dividends

Payments made to shareholders from profits.

Repurchase of Stock

Company buys back its own shares.

Marketable Securities

Financial instruments that can be quickly converted to cash.

Accruals

Liabilities for expenses incurred but not yet paid.

Interest on Municipal Bonds

Income from munis not subject to federal tax.

Progressive Tax Rates

Tax rates that increase with income levels.