Liability Adjusted Cash Flow Yield - LACFY


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.

  1. Current Assets

    A balance sheet account that represents the value of all assets ...
  2. Outstanding Shares

    A company's stock currently held by all its shareholders, including ...
  3. Inventory

    The raw materials, work-in-process goods and completely finished ...
  4. Warrant

    A derivative security that gives the holder the right to purchase ...
  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 ...
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