BERMOY GROUP

Question 1

Refers to the amount of cash available for distribution to both debt and equity claims of the business or asset. This is calculated from the net cash generated from operations and for investment over time.

Answer 1

Net Cash Flows

Question 2

The best case for firms is to fund its investments wholly or partly through cash from operations.

Answer 2

Source of financing for needed investments

Question 3

Debt financing is an excellent financing strategy especially for expanding companies.

Answer 3

Reliance on debt financing

Question 4

Significant disparities between cash flows and income may indicate earnings does not get converted to cash easily, suggesting low quality.

Answer 4

Quality of earnings

Question 5

is the amount made available to both debt and equity claims against the company.

Answer 5

Net Cash Flows to the Firm

Question 6

represents the amount of cash flows made available to the equity stockholders after deducting the net debt or the outstanding liabilities to the creditors less available cash balance of the company.

Answer 6

Net Cash Flows to Equity

Question 7

Basic measure of a firm’s profitability which refers to the bottom line figure in an income statement.

Answer 7

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS

Question 8

Pertains to non-cash items that are included in the computation of net income. The common non- cash items are the following: a) Depreciation and amortization; b) Restructuring charges; and c) Provisions for Doubtful Accounts.

Answer 8

NON-CASH CHARGES (NET)

Question 9

This item represents the net investment in current assets such as receivables and inventory reduced by current liabilities like payable. The amount captured is based on the movements in these accounts from prior periods.

Answer 9

WORKING CAPITAL ADJUSTMENTS

Question 10

This interest expense is a cash flow intended for the debt providers.

Answer 10

AFTER TAX INTEREST EXPENSE

Question 11

Pertains to cash outflows made to purchase or pay for capital expenditures that are required to support existing and future operating needs.

Answer 11

INVESTMENT IN FIXED
CAPITAL

Question 12

This represents how much cash the company generated from its operations.

Answer 12

CASH FLOW FROM OPERATING ACTIVITIES

Question 13

This represents how much cash is disbursed (received) for investments in (sale of) long-term assets like property, plant and equipment and strategic investments in other companies.

Answer 13

CASH FLOW FROM INVESTING ACTIVITIES

Question 14

This represents how much cash was raised (or paid) to finance the company.

Answer 14

CASH FLOW FROM FINANCING ACTIVITIES

Question 15

Pertains to income before deducting interest, taxes, depreciation and amortization expenses, net of taxes.

Answer 15

EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION

Question 16

are not typically adjusted if NCFF starts with EBITDA.

Answer 16

TAX SAVINGS ON NON-CASH CHARGES

Question 17

refers to cash available for common equity, participants or shareholders only after paying expenses satisfying operating and fixed capital requirements and settling cash flow transactions involving debt providers and preferred shareholders.

Answer 17

NET CASH FLOW TO EQUITY

Question 18

This refers to the amount of cash, received by the company as a result of borrowing of long-term debt.

Answer 18

Proceeds from borrowing

Question 19

this is the total amount used to service the loans or debt financing.

Answer 19

debt service

Question 20

same with the debt, preferred shares as another form of financing, other than the issuance of ordinary, equity, must also be factored in the calculation of a net cash flows available to equity.

Answer 20

Proceeds from issuance of preferred shares

Question 21

since payments made, the preferential, shareholders in the form of dividends are outflows

Answer 21

dividends on preferred shares

Question 22

A financial method of valuation and it is widely used to assess any investment value or estimate the valuation of a company or project.

Answer 22

DCF MODEL FORMULA

Question 23

What is the formula of DCF?

Answer 23

CF^t / (1+ r) ^t