FREE CASH FLOW is net income plus non-cash charges to income, specifically depreciation and amortization less capital expenditures, to sustain the basic business. Free cash flow per share is a measure of the amount of cash per share a business generates after expenditures for equipment or buildings. Free cash flow is available to be used for expansion, dividends, reduction in debt, or other purposes. Free cash flow is valued more than just about any other measure, including earnings (EPS). Cash assists companies to expand, develop new products, stock buy back, pay dividends, or reduce debt. Many analysts focus on free cash flow for insight into the core of a company's cash-generating engine.
EXCESS EARNINGS is that amount of anticipated benefits that exceeds a fair rate of return on the value of a selected asset base (often net tangible assets) used to generate those anticipated benefits.
UNDER-APPLIED FACTORY OVERHEAD is the amount of residual factory overhead that remains once all known overhead allocations are assigned to the applicable products. See also UNABSORBED COSTS.
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