SUMMARY
The composition and capital structure and its relationship with shareholder wealth is basically, one of the major challenges of financial managers, although the liabilities has the tax advantage, but causes an increase in interest expense and financial risk that finally reduces the stock returns and shareholder value. On the other hand the aim of management is the cash to maximize shareholder wealth by limiting the level of cash in the company.The main objective of this research is the “study of the relationship between Capital Structure and free cash flows with financial performance of companies” that in this regard, the capital structure (financial leverage) and free cash flow as independent variables and the rate of return on assets, the rate of annual stock return and economic value added as dependent variables and the size of company as a control variable, related to 130 manufacturing company accepted in Tehran Stock Exchange during the years 2009 to 2013 were studied. The statistical methods used in this studyis Correlation analysis method through multiple regression by panel data using software is Eviwes7. After explanation of research hypotheses and analyzing the results of the calculations were determined that financial leverage (independent variable) has a significant inverse relationship with the rate of return on assets, the rate of annual stock return and the economic value added (dependent variables) company size (controlled variable). Also there is a significant and direct correlation between free cash flows (independent variable) with the rate of return on assets, the rate of annual stock return and economic value added (dependent variables) and Company size (control variable).