For firms that do not pay dividends, a more suitable valuation may be the free cash flow model.

Question

Quizplus · Accepted Answer

The free cash flow model is often used to value firms that do not pay dividends as it focuses on the firm's ability to generate cash that can be reinvested in the business or used to pay off debt. This approach is especially useful for firms with high growth potential that may choose to reinvest earnings rather than pay out dividends to shareholders.

For Firms That Do Not Pay Dividends, a More Suitable