Posted by Tia on Thursday, March 1, 2007 at 10:17pm.
Free cash flow (FCF) is a cash flow available for distribution among all the security holders of a company. When free cash flow is negative; it could be a sign that a company is using up more cash to finance investments. If these investments earn a high return, the strategy has the potential to pay off in the long run.
c) Even though a company’s free cash flow were expected to be negative in all future periods, the company’s stock can be purchased for other objective rather than profit. These are; to prevent being at the mercy of foreign supplier of an integral component of production; to gain control or prevent hostile take over; for social value and patriotism, and partnership.
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