Flashcards in Free Cash Flow Deck (20):

1

## Dep and Amort- Adjustment to Net Income->

### ADD. I/S or CFO

2

## Impairment/Write Down- Adjustment to Net Income->

### ADD. I/S

3

## Gains (losses) on asset sale or early debt retirement- Adjustment to Net Income->

### Subtract (Add). I/S

4

## Restructuring Expense (income)- Adjustment to Net Income->

### Add (Subtract). I/S

5

## Deferred Tax Liability- Adjustment to Net Income->

###
Add. I/S B/S

*If unlikely to reverse

6

## Amortization of bond discount (premium) Adjustment to Net Income->

### Add (Subtract). CFO

7

## Net FC Investment Adjustments

### additions - proceeds

8

## Investment in Working Capital

###
WC includes all short term operating assets and libs

Excludes->cash and cash equivs, short term int bearing debt, notes payable, current of long term debt, dividends payable

9

## Working Capital Adjustments

###
direct relationship between changes in libs and changes in cash flow

->increase in liability account is source of additional cash

->decrease in liability is use of cash (subtract)

10

## Net Borrowing is on only

### FCFE

11

## Net Borrowing includes

###
Repayment of:

long term debt

notes payable

current portion of long term debt

(Adding back)

Cash flow = B/S change in debt - amortized discounts + amortized premiums

12

## FCFF formula

### NI + NCC + int(1-t) - WC inv - FC inv

13

## FCFE formula

### NI + NCC - WC inv - FC inv + net borrowing

14

## FCFE via FCFF

### FCFF - Int(1-t) + net borrowing

15

## NonCash Charges

###
pply to both FCFE and FCFF

-adjustments for noncash decrease and increases in NI based on accrual accounting

16

## FCFF via CFO

### CFO + Int(1-t) - FC inv

17

## FCFE via CFO

### CFO - FC inv + net borrowing

18

## FCFF via EBIT

### EBIT (1-t) + dep - WC inv - FC inv

19

## FCFF via EBITDA

### EBITDA(1-t) + (depr * t) - WC inv - FC inv

20