ABSTRACT
Chapter 3 looks at the concept of free cash flows and how it serves as the measure of the new value created by investment decisions. More specifically, it explains in detail what the three components of free cash flows – cash flows from operation, capital expenditure and change in net working capital – represent. The chapter also highlights the difference between cash and profit. Anyone who wants to have a clear idea of cash versus profit, as well as the concept of free cash flows, will find this chapter extremely valuable.
