Which statement accurately describes the free cash flow yield?

The correct statement about free cash flow yield is that it compares Free Cash Flow per share to share price. Free cash flow yield is a financial metric that provides investors with insight into a company’s ability to generate cash flow relative to its market valuation. Specifically, it is calculated by taking the company's free cash flow per share and dividing it by the current market price per share. This ratio is indicative of how much cash a company is generating relative to what investors are paying for its stock.

A higher free cash flow yield suggests that a company is potentially undervalued or that it is generating a significant amount of cash relative to its market capitalization, which can be an attractive signal for investors looking for stronger cash generation capabilities.

In contrast, other statements touch on different aspects of financial analysis. Operational efficiency is more related to metrics like operating margins or return on equity. Dividend distributions are tied more closely to metrics like dividend yield, while total revenue divided by expenses concerns gross profit margins or operating margins, rather than free cash flow.