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Financial Statement AnalysisModule 5 of 9

Analyzing Statements of Cash Flows II

3

Concepts

5

Formulas

1

Decisions

2

Quiz Questions

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Key Concepts

3 concepts covered in this module.

Free Cash Flow to Firm (FCFF)

Cash available to ALL capital providers (debt + equity). FCFF = CFO + Int(1-t) - FCInv.

Free Cash Flow to Equity (FCFE)

Cash available to equity holders. FCFE = CFO - FCInv + Net borrowing.

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Formulas

5 essential formulas for this module.

FCFF from CFO

FCFF = CFO + Int×(1-t) - FCInv

Where: FCInv = capital expenditures (net)

FCFF from NI

FCFF = NI + Dep + Int(1-t) - FCInv - WCInv

Where: WCInv = increase in working capital

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Decision Frameworks

1 decision frameworks to guide your analysis.

FCFF vs FCFE?

  • FCFF: for firm valuation (WACC-based DCF)
  • FCFE: for equity valuation (cost of equity-based DCF)

Mind Map

Visual overview of how concepts connect in this module.

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Flashcard

Free Cash Flow to Firm (FCFF)

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Answer
Cash available to ALL capital providers (debt + equity). FCFF = CFO + Int(1-t) - FCInv.
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Analysis of Inventories