The Relationship between Free Cash Flows and Return on Equity Law

Abstract

Free cash flows possess special importance for inner and outer organization users. Companies which have high free cash flows, increase their profits by use of commitment items and counteract and balance low profits. Methodology: This order brings improvement of company market value and return on equity law. The aim of this research is the evaluation of information increasing content in free cash flows for efficiency changes description of equity law and company value. For doing this research, a hypothesis is considered: there is meaningful relation between free cash flows and return on equity law. Results: By use of 120 companies data which are research sample member and for a six year temporal period from beginning of financial year 2007 until the end of financial year 2013, research theories had been tested in 5 percent error level which by use of correlation coefficient, correlation level was determined between independent variable with every one of dependent variables and then through relevant p-value, we would specify that is there relationship between dependent or independent variables or not. Conclusion: The recent research findings show that there is meaningful and direct relationship between free cash flows and return on equity law.