Thoughts On Enterprise Value Management Based On Free Cash Flow Discount Model

As the reform of China’s capital market continues to deepen and multi-level market structure is being improved, more and more companies attempts to visit the capital market, this brings capital market continuous development and improvement. In this process, the goal of enterprise management changes from maximize profits to maximize enterprise value, then enterprises enter the stage of value management. Value management is also known as value-based management. It is based on the enterprise value maximization as the ultimate goal and assessment of the enterprise value as the starting point. After driving factors of enterprise value are identified by value assessment, we get the management concepts and methods as the basis for management decision-making.Based on the economic background and concepts mentioned above, this paper firstly sorts out and reviews theory and research about value assessment and management. Then it proposes discounted free cash flow model, which is commonly used in actual operation, and builds links between value assessment and value management through this model. We can identify the driving factors of enterprise value during the process of value assessment and raise targeted measures to enhance enterprise value on the basis of these driving factors. This analytical model digs out further enterprise value while combining the objective of "maximization of enterprise value" into practice. After that, this paper applies Company C to the analytical framework and presents the process to readers more specifically by way of case studies. In the last chapter, by combining theoretical explanations and case studies, we get the advantages and disadvantages of the analytical framework which can help to improve the framework in further studies. In general this paper provides some reference to the enterprise value management by applying the analytical framework which is based on the discounted free cash flow model.