The ultimate goal of any business is the creation of value for the owners of that business, whether that business is privately held by one owner or is publicly held with a multitude of owners/shareholders. Free cash flow (FCF) is an economically valid business performance measurement tool that can help view value creation within a company. This tutorial will provide you with a firm understanding of how to properly and effectively measure business performance using FCF, thereby providing you with tools to make better business decisions.

Objectives
On completion you will be able to:

• Address the shortcomings of net income and some of the more widely used cash flow metrics as measures of business performance
• Describe the use of free cash flow (FCF) as an economically valid business performance measurement tool and how it can help view value creation within a company
• Recast the income and balance sheet statements in order to create a NOPAT statement that reflects the economic operating inflows and outflows and an invested capital statement that represents the economic investment made by the capital contributors