Free Cash Flow & Cash Conversion Cycle
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Free Cash Flow & Cash Conversion Cycle

Christian Otteman Christian Otteman

Christian Otteman

P6 Primavera Planner & Scheduler

发布日期: 2022年7月24日
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Introduction

The following is an examination of Free Cash Flow and the Cash Conversion Cycle. Free cash flow is defined as funds independent of capital expenditures. The cash conversion cycle is a value that expresses the efficiency a company has at transforming goods and services from inventory, then sales, and finally cash.

Free Cash Flow and Cash Conversion Cycle

Free Cash Flow “reconciles net income by adjusting for non-cash expenses, changing in working capital, and capital expenditures”?(Fernando, 2022). With free cash, funds become available for investment by stockholders and investors, repayment to creditors, and dividend payments. Free cash is favorable in the eyes of financial advisors because it can easily be used for investing in property, plant, and equipment. A good cash conversion cycle indicates an effective operation and management staff and likely a positive stance in the stock market. In essence, it is a “metric that expresses the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales”?(Hayes, 2022).?

References

Fernando, J. (2022, June 19). Free Cash Flow (FCF). Retrieved from www.investopedia.com: https://www.investopedia.com/terms/f/freecashflow.asp

Hayes, A. (2022, June 15). Cash Conversion Cycle (CCC). Retrieved from www.investopedia.com: https://www.investopedia.com/terms/c/cashconversioncycle.asp

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