Free Cash Flow Yield
Free cash flow expressed as a percentage of market capitalisation or enterprise value.
Formula
Free Cash Flow Yield = Free Cash Flow / Market Capitalisation x 100
Unit
%
In depth
Free cash flow yield is the cash-based counterpart of earnings yield, and it is harder to manipulate because it comes after actual capital expenditure rather than after a depreciation charge management chooses. It answers the question an owner would ask: if I bought the whole company today, how much spendable cash would it hand me each year. The measure penalises companies in a heavy investment phase, so a low yield during expansion is not automatically a warning. Computing it against enterprise value rather than market capitalisation makes companies with different debt levels comparable.
Worked example
Free cash flow ₹80 crore against market capitalisation ₹1,800 crore gives a yield of 4.4%, versus an earnings yield of 5%. The gap is the ₹140 crore of capital expenditure against ₹60 crore of depreciation — real cash the earnings figure did not deduct.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Free Cash Flow Yield” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.