Free cash flow valuation

1. What are free cash flows? 2. Explain the difference between a company’s operating cash flow under GAAP and its free cash flow. 3. Briefly describe the key features of the free cash flow approach to valuation. E7-5 Why P/E ratios vary (LO 7-4) The price/earnings ratios of four companies from the same industry are:   Company P/E Ratio Ingles Markets  7.9 Kroger  6.6 Sprouts Farmers Market 18.3 Weis Markets 17.4 Source: Based on closing stock prices on March 17, 2019, and trailing-twelve-months earnings per share, both from Yahoo Finance. Required: What factors might explain the difference in the P/E ratios of these companies? E7-7 Earnings quality (LO 7-5) Required: 1. Define the term quality of earnings. 2. List the techniques that management can use to improve a company’s reported earnings performance in the short run. Give examples of low-quality earnings com