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Free cash flow is a critical measure of business success as it represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike other financial performance measures, free cash flow is a direct measure of a company's financial health and its ability to generate shareholder value. It's the cash that a company is able to generate and distribute to shareholders, invest in new opportunities, or use for strategic business purposes. A positive free cash flow indicates that a company is generating more cash than is required to run the business and reinvest in growth, which is a sign of a healthy and successful business.
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According to Gerstner, free cash flow is the most important measure of a business. He learned this as the head of RJR Nabisco, when billions in assets were offloaded to pay debts. He applied the same to IBM to stabilize finances. IBM had been so successful that it felt like a bubble: there was little focus on how customer needs or competitors were evolving. To change this dynamic, Gerstner became a microphone for customer complaints and let the marketplace – instead of the whims of executives – dictate all activities. Gerstner initially saw IBM's financials and thought the company's chance of survival was no more than 20%. To prevent demise, he slashed expenses through consolidation of functions, sold high-value items like real estate and fine art, and ultimately layoffs. Gerstner's toughest challenges were "soft" problems like morale, company culture, and values. A culture without internal politics frees up employees to focus more on customers and competitors rather than their colleag...
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Learn from one of the best turnaround leaders of our time, Lou Gerstner of IBM. Take a page from Gerstner’s playbook on how to reinvigorate a quickly...
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