Analysis Of Enterprises Valuation Based On Free Cash Flow

Nowadays, the research on valuation of modern enterprises is of momentous current and theoretical significance in the process of deepening enterprise reform in china. Enterprise valuation is not only a necessary toll for outside investors to analyze investment, but also a means for managers inside enterprises to use. Free cash flow is created from enterprises operation activities, and it is better than profit, cash flow on measuring effect of investment and operation. It can describe perfectly long-term development abilities of enterprises. According to the common financial theory, enterprises'value equals to the sum of discount of cash flow in future by proper rate. Based on research of formers, this paper tries to use discount-cash-flow model to calculate enterprises'value. As the discount-cash-flow value is becoming bigger, the enterprise's value grows bigger and the stock price should be higher. the ultimate target of enterprise is max-value. Different factors determine different enterprises. Which factor can bring more free cash flow, it will determine the enterprise's value and be worth to be studied. In the process of enterprise, we can make our enterprises bigger and stronger only by developing the key factors.