Evaluation Of Enterprises Valuation Based On Free Cash Flow

In today’s international asset evaluation industry, enterprise value assessment is one of the rapid developing fields, which has been paid close attention to by the governments and scholars. There are many malpractice in other existing common method(EVA) of enterprise value assessment. Meanwhile, the free cash flow method covers comprehensive information, can be more objective and comprehensive in the. reflection of the enterprise’s ability to create value.But the study of the theory and methods ofenterprise value assessment in our countrylags behind the countries which are more mature in market economy. There’snot yet a uniform definition of the concepts and parameter determination of the free cash flow method.This test analyzes the importance of free cash flow in enterprise value appraisal method, on the basis of cash flow theory, combining with the practice, reviewing the related theories. Meanwhile, we compare the other enterprise value appraisal method. In terms of the free cash flow evaluation method, we get a specification summary. Then, combining with the actuation of GL enterprise, we describe in detail the specific steps about how to use free cash flow to assess value.At the same time,this test evaluate the value of GL enterprise by the method of EVA. Then the results by this two methods and market value of the firm are compared. It is concluded that the most suitable for evaluation of the current situation of the enterprises in China is free cash flow discount method because it is such a good conclude that can reveal the real enterprise value.At last, the limitations of using free cash flow is analyzed in this paper, thus, the corresponding suggestions and measures would be put forward.