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Article Critique: Cash Flow

Please help with an assessment how the article relates to the financial management of a company.
Please see attachment to view article.

1. What is the author's focus?
2. What points is the author making?
3. How does the authors points apply to financial management?
4. How does DCF differ from a cash flow analysis? which is a better option?
5. What is the author's conclusion, findings or recommendation?

Attachments

Solution Preview

The focus of the author is showing the pluses and minuses of using discounted cash flow analysis (DCF) as a tool for valuing business models, as opposed to straight cash flow receipts from an investment.

The points the author is making include the following:

-DCF works well with lower growth firms that have steady performance results, including revenue and returns --- he cites Microsoft as an example of this analysis. In the beginning, Microsoft was a high growth oriented firm, which did not lend itself to DCF for valuation purposes because of the huge fluctuations n results and in market conditions. However, it has evolved into a value based stock with steady, if not ...

Solution Summary

This is an analysis of an article dealing with cash flow and discounted cash flow analysis. It reflects the position of the author with respect to the factors which contribute to the discounted cash flow model and how it relates to financial principles of sensitivity analysis, risk/reward, and net present value.

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