Financial Thought Of The Day January 7, 2015: Free Cash Flow To Stockholder’s Equity

One on the most used metrics in the financial world when gauging profitability relative to the capital base is return on equity defined by variations of the following formula: [Net Income/Stockholder’s equity] x 100. A business owner would want to know how much a capital base can generate free cash flow which would be defined by the following formula: [Free cash flow/Stockholder’s Equity] x 100.