The Discussion Of The Method To Earning Capability On The Basis Of The Free Cash Flow

The ultimate purpose for the existence of a modem corporation equals to the maximization of stockholders' investment values. From this academic perspective, we explore in this dissertation how to objectively measure the profitability of China's listed companies.As usual as in the most countries, China's financial accounting system is based on accrual system and historic cost system. Given that corporate management can chose different accounting policies within legal framework, a company's book earnings are prone to be adjusted or rigged by its top executives, which may mislead investors in assessing the company's real return.Alternatively we suggest introducingFCF (Free Cash Flow) index to replace the ordinary profitability indices of financial accounting. We will do a positive research to the electric listed company and explore the it.