Valuation Of Corporation S Based On Free Cash Flow Analysis

Valuation is not only of great importance both in management and economics, but also the most concerned issue in investors and shareholders’ minds. How to assess the enterprise value precisely is always one of the most concerned issues for operators. They often chose the cost approach formerly. With the increasingly maturity of the market, the free cash flow have more advantages and adaptabilities. Enterprise value equals to the future cash flow discounted by certain risk premium rate is the basic principle of this analysis.Theory and case analysis are combined in this article. We come up with the effect of valuation in financial management, decision-making of corporate mergers and investment analysis at first, and then introduce some related articles and elucidate the background, direction and methodology of this article. We select the discounted cash flow analysis as the method of valuation in this article by comparing the advantages and disadvantages of several methods. Through the calculation of free cash flow of enterprise S and the data of the discounting model, we get the discounting value of S, in which we use the balance sheet approach and the cash flow statement to calculate the value respectively.This article comes to the conclusion that although the maturity is not high enough, the free cash flow is still suitable for Chinese market. Extraction data from the cash flow statement can improve the accuracy in the calculating process. The free cash flow analysis can be influenced by subjective factors and the amount of information disclosure, thus it can only become a reference. Further research needs to be done in the future.