The Relationship between Free Cash Flows and Return on Equity Law Journal Article

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. 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. 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 pvalue, we would specify that is there relationship between dependent or independent variables or not. The recent research findings show that there is meaningful and direct relationship between free cash flows and return on equity law.

"Companies which have high free cash flows, by use of commitment items increase their profits and balance and counteract low profits which cause making negative absolute value and this work change division policies of stock-profit and return on equity law. The purpose of this research is evaluation of information increasing content of free cash flows for description of commitment items changes, return on equity law and company value. And companies that have high free cash flows, by use of different methods increase their profits and balance and counteract low profits which causes making negative absolute value and this work changes return on equity law. As for the results which is originated from statistical tests, and because p-value (0/000) is less than a in %5 level, therefore in meaningful level a=%5, H0: B=0 hypothesis is failed (without being relationship) and research hypothesis H1: B=0 is accepted (being relationship), And it is concluded that in %5 meaningful level, there is relationship between free cash flows and return on equity law and because Beta (B) coefficient and line slope is positive, there is direct relationship between free cash flows and return on equity law. Suggestions in relation with research results: According to research results, we can present some suggestions as follows: 1- it is suggested to investors which their goal of investment in stock is stock price increasing in long period, they should not find sufficient only to profitability process and company profit content, but other variables should bear in mind like return on equity law, company cash flows reports, company value, etc."