Free Cash Flow Yield

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Free Cash Flow Yield

Explanation: Free Cash Flow Yield is a financial metric that measures the percentage of free cash flow generated by a company relative to its market capitalization. It is calculated by dividing the company’s free cash flow per share by its current market price per share and multiplying by 100 to express it as a percentage. Free cash flow represents the cash generated by a company’s operations after accounting for capital expenditures necessary to maintain or expand its asset base.

Example: TCS has a Free Cash Flow Yield of 3.41% as of FY23. This means that TCS generated free cash flow equivalent to 3.41% of its market capitalization during the fiscal year. Free Cash Flow Yield provides investors with insight into the company’s ability to generate cash relative to its valuation in the market. A higher Free Cash Flow Yield is generally favorable, indicating that the company generates substantial free cash flow compared to its market value. Investors often use this metric to assess the attractiveness of an investment opportunity and compare it with alternative investment options in the market.

You can view the Free Cash Flow Yield value for any company on Radar under Efficiency Ratios in the Ratios section.

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