Ever wondered how some traders are consistently profiting from the Forex market? This article will provide a comprehensive overview of the concept of free cash flow yield (FCFY) in Forex trading and explain how it can be used to generate profits in the market. Cash flow yield is a measure of a company’s ability to generate free cash flow relative to its market capitalisation. It is calculated by dividing the company’s free cash flow by its market capitalisation. Free cash flow is the amount of cash generated after all operating expenses, taxes, capital expenditures, and other cash outflows are subtracted from the company’s operating cash flow.
One of the primary uses of the cash flow yield metric is to compare a company’s performance to that of its competitors in the same industry. Companies that have a higher cash flow yield than their competitors can potentially be considered more attractive investments.
An investor should also be cognizant of the company’s cash flows, as cash flows may not always match reported earnings. Companies may have accounting practices that can distort reported earnings. A business may also be sacrificing long-term value by overly focusing on short-term profits. It is important to review a company’s financial statements and other disclosures, such as management discussion and analysis, to understand the quality of the company’s cash flows.
Finally, investors should review the reported free cash flows in the context of the company’s capital structure. Companies with a higher debt burden may need to allocate additional resources to cover debt payments, which can reduce the amount of cash available for returns to shareholders.
