📊 Example 3: Company C a natural resources company – Strong Free Cashflow Supports Business Stability
📌 Year: 2024
📌 Currency: USD
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🔹 Strong Free Cashflow – A Sign of Business Strength
Unlike companies that struggle with negative cashflow, Company C has consistently generated strong free cashflow for the past three years.
📊 2024 Financials:
💰 Net Profit: $483 million
💰 Free Cashflow: $461 million
📌 Key Insight: Company C cashflow closely matches its profit, showing strong cash generation and financial health.
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🔎 Why is Company C’s Free Cashflow So Strong?
📌 1️⃣ Profitability Reflects in Cashflow
• Many companies report high profits but struggle with cashflow.
• Company C free cashflow closely matches its net profit, meaning its earnings are being converted into real cash.
📌 2️⃣ Stable Operations & Controlled Investments
• Unlike companies that burn cash on aggressive expansion, Company C has managed operations efficiently, ensuring that cashflow remains positive.
📌 3️⃣ No Need for External Funding
• Since it generates enough cash, Company C doesn’t need to raise equity or borrow heavily.
• This allows the company to focus on shareholder returns and business growth rather than worrying about financing.
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📊 Key Takeaways
✔ A company with strong free cashflow has control over its financial future.
✔ Company C doesn’t need to raise capital since its cashflow covers operations and investments.
✔ This financial strength allows the company to reinvest or return cash to shareholders.
📌 This is why calculating free cashflow is essential. A business that generates cash can sustain itself without relying on external funding.
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👉 Go to the Next Example
👉 Go to Lesson 4
📌 Year: 2024
📌 Currency: USD
⸻
🔹 Strong Free Cashflow – A Sign of Business Strength
Unlike companies that struggle with negative cashflow, Company C has consistently generated strong free cashflow for the past three years.
📊 2024 Financials:
💰 Net Profit: $483 million
💰 Free Cashflow: $461 million
📌 Key Insight: Company C cashflow closely matches its profit, showing strong cash generation and financial health.
⸻
🔎 Why is Company C’s Free Cashflow So Strong?
📌 1️⃣ Profitability Reflects in Cashflow
• Many companies report high profits but struggle with cashflow.
• Company C free cashflow closely matches its net profit, meaning its earnings are being converted into real cash.
📌 2️⃣ Stable Operations & Controlled Investments
• Unlike companies that burn cash on aggressive expansion, Company C has managed operations efficiently, ensuring that cashflow remains positive.
📌 3️⃣ No Need for External Funding
• Since it generates enough cash, Company C doesn’t need to raise equity or borrow heavily.
• This allows the company to focus on shareholder returns and business growth rather than worrying about financing.
⸻
📊 Key Takeaways
✔ A company with strong free cashflow has control over its financial future.
✔ Company C doesn’t need to raise capital since its cashflow covers operations and investments.
✔ This financial strength allows the company to reinvest or return cash to shareholders.
📌 This is why calculating free cashflow is essential. A business that generates cash can sustain itself without relying on external funding.
⸻
👉 Go to the Next Example
👉 Go to Lesson 4