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]

BREAKING DOWN '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. Free Cash Flow Yield

    An overall return evaluation ratio of a stock, which standardizes ...
  2. Operating Cash Flow Ratio

    A measure of how well current liabilities are covered by the ...
  3. Price to Free Cash Flow

    A valuation metric that compares a company's market price to ...
  4. Economic Value Of Equity - EVE

    A cash flow calculation that takes the present value of all asset ...
  5. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
  6. Liability

    Liabilities are defined as a company's legal debts or obligations ...
Related Articles
  1. Investing

    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.
  2. Investing

    Free Cash Flow Yield: The Best Fundamental Indicator

    Cash in the bank is what every company strives to achieve. Find out how to determine how much a company is generating and keeping.
  3. Investing

    Free Cash Flow Yield: A Fundamental Indicator

    Free cash flow can measure a business’s performance as if you’re looking at its net income line.
  4. Investing

    Fundamental Case Study: Is Amazon's Cash Flow Actually Solid? (AMZN)

    Review Amazon's cash flow situation, including its free cash flow yield, operating cash flow from organic growth and cash flow from debt financing.
  5. Investing

    Analyze Cash Flow The Easy Way

    Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors.
  6. Investing

    Cash Flow Statement and Financial Health

    A cash flow statement records the amounts of cash and cash equivalents entering and leaving a company.
  7. Investing

    Understanding Total Liabilities

    Total liabilities are the combined debts an individual or company owes.
  8. Investing

    Cash Flow From Investing

    Cash flow analysis is a critical process for both companies and investors. Find out what you need to know about it.
  9. Small Business

    Understanding Cash Flow

    Learn about the different types of cash flows and the importance for businesses to properly manage their cash flows.
  10. Investing

    Why Goldman Is Warning About Free Cash Flow Yield (GS)

    Learn why Goldman Sachs is alerting investors to the importance of cash flow, and discover a recommended alternative equity valuation metric to free cash flow.
RELATED FAQS
  1. What does the operating cash flow ratio measure?

    Learn about the operating cash flow ratio, how the ratio is calculated and what it indicates about a company. Read Answer >>
  2. Why do analysts look at operating cash flow?

    Learn how operating cash flow is used to determine financial health. Examine how cash flow is calculated, and what a low ... Read Answer >>
  3. Free & operating cash flows: What's the Difference?

    Learn the difference between free cash flow and operating cash flow. Explore how analysts use earnings and cash flow to evaluate ... Read Answer >>
  4. What is the difference between the operating the operating cash flow ratio and operating ...

    Find out more about the operating cash flow ratio, the operating cash flow margin, how to calculate these ratios and the ... Read Answer >>
  5. What sorts of factors decrease cash flow from operating activities?

    Learn about the factors that reduce cash flow from operations. What causes net income to decline, and what other uses and ... Read Answer >>
Hot Definitions
  1. Efficient Frontier

    A set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a ...
  2. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the ...
  4. Border Adjustment Tax

    A tax levied on goods based on where they are sold – exported goods are exempt from tax; those imported and sold in the ...
  5. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  6. Blind Trust

    A trust in which the trustees have full discretion over the assets, and the trust beneficiaries have no knowledge of the ...
Trading Center