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13.07.2022 - 17:29

Operating Free cash flow (FCFF) is calculated as: a) Net Income + Depreciation Expense – Capital Expenditures – Change in Working Capital – Principal Debt Repayments + New Debt Issues. b) EBIT (1 – T) + Depreciation Expense – Capital Expenditures – Change

Question:

Operating Free cash flow (FCFF) is calculated as:

a) Net Income + Depreciation Expense – Capital Expenditures – Change in Working Capital – Principal Debt Repayments + New Debt Issues.

b) EBIT (1 – T) + Depreciation Expense – Capital Expenditures – Change in Working Capital – Change in Other Assets.

c) Net Income + Depreciation Expense – Capital Expenditures + Change in Working Capital – Principal Debt Repayments – New Debt Issues.

d) Net Income – Depreciation Expense + Capital Expenditures – Change in Working Capital – Principal Debt Repayments + New Debt Issues.

e) EBIT (1 – T) + Depreciation Expense + Capital Expenditures + Change in Working Capital – Change in Other Assets.

Answers (1)

Verla April 17, 2023 в 11:51

The correct answer is (a) Net Income + Depreciation Expense - Capital Expenditures - Change in Working Capital - Principal Debt Repayments + New Debt Issues. Operating Free Cash Flow (FCFF) represents the cash available for a company to pay to its investors, including bondholders and stockholders, after the expenses necessary to maintain the company's operations are taken care of. The formula for calculating FCFF considers several factors, including net income, depreciation expense, capital expenditures, changes in working capital, principal debt repayments, and new debt issues. By subtracting capital expenditures, debt repayments, and changes in working capital, the formula accounts for the costs of maintaining the company's operations, while new debt issues increase the amount of available cash. This formula is commonly used by investors and analysts to evaluate a company's financial performance and make investment decisions.

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