Liability Adjusted Cash Flow Yield - LACFY

AAA

DEFINITION of 'Liability Adjusted Cash Flow Yield - LACFY'

A fundamental analysis calculation that compares a company's long-term free cash flow to its outstanding liabilities over the same period. Liability adjusted cash flow yield can be used to determine how long it will take for a buyout to become profitable or how a company is valued. It is calculated as:


Average Free Cash Flow
[(Outstanding Shares + Options + Warrants) x (Per Share Price) - Liabilities] - [Current Assets - Inventory]

INVESTOPEDIA EXPLAINS 'Liability Adjusted Cash Flow Yield - LACFY'

Liability adjusted cash flow yield is not commonly used in company valuation. To see whether an investment is worthwhile, an analyst may look at ten years worth of data in a LACFY calculation and compare that to the yield on a 10 year Treasury note. The smaller the difference between LACFY and the Treasury yield, the less desirable an investment is.

RELATED TERMS
  1. Outstanding Shares

    A company's stock currently held by all its shareholders, including ...
  2. Option

    A financial derivative that represents a contract sold by one ...
  3. Warrant

    A derivative security that gives the holder the right to purchase ...
  4. Current Assets

    1. A balance sheet account that represents the value of all assets ...
  5. 10-Year Treasury Note

    A debt obligation issued by the United States government that ...
  6. Fundamental Analysis

    A method of evaluating a security that entails attempting to ...
RELATED FAQS
  1. What debt/equity ratio is typical for companies in the utilities sector?

    In the utilities sector, for companies providing general utilities such as gas and electricity, the average debt/equity ratio, ... Read Full Answer >>
  2. What do hard and soft goods in the retail sector refer to?

    Hard goods and soft goods, also referred to as hardline and softline, designate different types of goods a retailer offers. ... Read Full Answer >>
  3. What price-to-earnings ratio is average in the utilities sector?

    As of December, 2014, the average price-to-earnings (P/E) ratio for the utilities sector is approximately 23, which is considerably ... Read Full Answer >>
  4. What can I learn about a company by studying its earnings report?

    Fundamental analysts often pore over quarterly earnings reports when the reports arrive, hoping to gain an inside track on ... Read Full Answer >>
  5. What metrics can be used to analyze a telecommunications company if they have very ...

    Telecommunications companies play a very crucial role in the economy by providing access to voice, text, video and other ... Read Full Answer >>
  6. What is the average annual growth rate of the utilities sector?

    Utilities companies are popular among investors for their stable cash flows and dividend yields. The utilities sector includes ... Read Full Answer >>
Related Articles
  1. Investing Basics

    What Are A Stock's "Fundamentals"?

    The investing world loves to talk about fundamentals, but do you know what it means?
  2. Trading Strategies

    Introduction to Types of Trading: Fundamental Traders

    Learn about the different traders and explore in detail the broader approach that focuses on company-specific events.
  3. Forex Education

    Understanding Liability-Adjusted Cash Flow Yield

    Learn why LACFY is a valuable metric for investors looking to make quick valuation calls on a company's stock relative to it's free cash flow history.
  4. Markets

    Free Cash Flow: Free, But Not Always Easy

    Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery.
  5. Active Trading Fundamentals

    Forces That Move Stock Prices

    You can't predict exactly how stocks will behave, but knowing what affects prices will put you ahead of the pack.
  6. Entrepreneurship

    5 Hot Startup Industries Other Than Tech

    Though it’s the Facebooks and Instagrams that get the attention, not all successful startups are in tech.
  7. Fundamental Analysis

    Is Gillette's Market Edge Becoming Razor-Thin?

    Despite Gillette's success with the razor-and-blades strategy, the increasing popularity of beards and new competition may slow the brand's growth.
  8. Professionals

    How To Make Money Using Tobin's Q Ratio

    Although it seems simple, Tobin's Q Ratio is more complex than it appears. We explore some of its main strengths and weaknesses.
  9. Investing Basics

    Know When To Buy & Hold It, Know When To Fold It

    A passive buy-and-hold strategy using ETFs is one of the most efficient ways of building a portfolio.
  10. Charts & Patterns

    Pros & Cons Of A Passive Buy And Hold Strategy

    Forget market timing: we look at the pros and cons of the tried, tested, and true strategy of buying and holding stocks for the long-term.

You May Also Like

Hot Definitions
  1. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then ...
  2. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  3. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  4. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  5. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  6. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!