Once we've done the free cash flow forecast, it's very important to look at the ratios to really establish whether you truly have reached a steady state by the end of the forecast period.

What does a steady state mean? Well, it means that our revenue growth has slowed down to a sustainable long-term level.

So let's firstly calculate the revenue growth for Red Bull.

I can take it, I can either calculate it from the income statement or I can take it from the total revenue growth row 12.

And then I'm also going to pull in my EBIT margin, which again is probably in the financial ratios if I go down.

Yep, I've got an EBIT margin there, so I can pull that in.

It's the wrong year though, so you've just got to watch that, So I'm gonna change that to a D.

So this both should be in column D.

And then I'm gonna copy this across because I can't calculate the cash conversion ratio until I've got my free cash flows.

The cash conversion ratio measures how much, what percentage of NOPAT is converted into free cash flow.

So I can take my unleavened free cash flow and divide it by the NOPAT.

So in 2024, about 82% of NOPAT converts into free cashflow.

Now what we should see is that as the growth in the business starts to fall, and you can see that our growth goes down to 2.6%, which is just above inflation, we should start to see the cash conversion ratio increase.

And the reason for that is that as your growth slows, you need to invest less in operating working capital and capital expenditure. And that's exactly what happens here.

As the growth slows, the cash conversion ratio rises.

Now, in an ideal world, we really should have the growth rates in the two final years pretty consistent. However, in this case, it's not gonna make a material difference.

But what we do need to understand and think about is that the last year's revenue growth should be similar to the long-term growth rate we're gonna apply in our terminal value.

And that 2.6%, the long-term inflation target for most countries, certainly in EA and the Americas, is around 2%.

But you don't want to be right at the inflation level because it means you've got a static business.

And if you have economic growth, you would normally expect the business to certainly start to have some growth if the economy growths not necessarily at the same rate as the economy because it means the company will never be crowded out by new technology.

And that does happen. But I think 2.6 is not an unreasonable long-term growth rate for the firm.