Core Operating Accounts Flashcards
1
Q
Cash and Cash Equivalents
A
Yes but less than 2% of Sales only
2
Q
A/R
A
Yes
3
Q
Deferred Income Tax Assets
A
No
4
Q
Other Current Assets
A
Yes
5
Q
Net PP&E
A
Yes
6
Q
Goodwill
A
No
7
Q
Other Intangible Assets
A
No, unless it’s software
8
Q
Restricted Cash
A
Yes, if it’s tied to Operations
9
Q
Investments
A
No
10
Q
Deferred Income Tax Assets
A
No
11
Q
Post retirement benefit Assets
A
No
12
Q
Other Noncurrent Assets
A
Yes
13
Q
Short Term Debt
A
No, Financing Option
14
Q
A/P
A
Yes
15
Q
Accrued Salaries
A
Yes
16
Q
Self Insurance Reserves
A
Yes
17
Q
Deferred Income Tax Liability
A
No
18
Q
Post retirement Benefit Obligations
A
No
19
Q
Other Current Expenses
A
Yes
20
Q
Long term Debt
A
No
21
Q
Self Insurance Reserves
A
Yes
22
Q
Deferred Income Tax Liabilities
A
No
23
Q
Post Retirement Benefit Obligations
A
No
24
Q
Other Noncurrent Liabilities
A
Yes
25
Equity
No, nothing from Equity
26
NOPLAT
Net Operating Profits less Adjusted Taxes
27
FCF=
NOPLAT-Net Investment
NOPLAT - (NOPLAT * IR)
NOPLAT * (1-IR)
NOPLAT * (1 - (g / ROIC)
28
Net Investment=
Invested Capital t+1 - Invested Capital t
29
ROIC=
NOPLAT / Invested Capital
30
Investment Rate=
Net Investment / NOPLAT
31
WACC
Weighted Avg Cost of Capital; minimum rate of return investors expect to achieve
32
VALUE=
FCF t1 / (WACC - g) assumes the firms sales and NOPLAT grow at a constant rate - and-
NOPLAT t1 * (1 - (g / ROIC)) / (WACC - g)
33
IR
Investment rate
| g=ROIC * IR, so IR = g / ROIC
34
Key Concept of Leverage
Leverage by itself does not increase the cash flows thus it does not create value
