CFs

Question 1

Big Picture 1

Answer 1

NI
\+/- Non-Cash Item (ie: depreciation)
=FFO (Funds from Operation)
\+/- Working Capital (WC)
=CF ops
-Capex
=FCF (Free Cash Flow to Equity or levered FCF)

if Depreciation < Capex, then it is fast growing company

Question 2

Big Picture 2

Answer 2

1) outflow (-)
    inflow (+)
2) B/S #, is change in 
3) I/S # , use same year, not the change
Asst up (-)
         Down (+)
Liab up  (+)
        down  (-)

Question 3

CF from Operations

Answer 3

Net Income	
Depreciation	
(Inc) A/R	
(Inc) Inventory	
Inc A/P	
Inc Accrued Liab.	
  = CF from Operations

Question 4

CF from Investments

Answer 4

Change in Gross Fixed Assets

= CF from Investments

Question 5

CF from Financing

Answer 5

Change in Bank Loan
Change in Long-Term Debt
Change in Common Stock
Payment of Cash Dividends
  =CF from Financing

Question 6

Ending Cash (this year)

Answer 6

Net Cash Flow
+ Beginning Cash
=Ending Cash

Question 7

Summary Information

Answer 7

Total Debt : not includ acc pay and liab, only include that you need to pay interest.
Total Equity
Debt/(Debt + Equity)
CF from Ops
FFO
Levered FCF
EBIT
EBITDA
ROE = NI / Equity = 1400/5800=24%  good

Question 8

Total Debt

Answer 8

not includ acc pay and liab, only include that you need to pay interest.
Bank Loan 1800
+ Long-term debt 4000

Question 9

Total Equity

Answer 9

Common stock 2400

+Retained earnings 3400

Question 10

Debt/(Debt + Equity)

Answer 10

5800/ (5800+5800) = 50%

Question 11

FFO

Answer 11

Net Income 1400
+ Depreciation 2000
=3400

Question 12

Levered FCF

Answer 12

NI
\+/- Non-Cash Item (ie: depreciation)
=FFO 3400
\+/- Working Capital (WC) -1600
=CF ops 1800
-Capex -3000
=FCF (levered FCF) -1200

Question 13

EBIT

Answer 13

NI 1400
+Interest 600
+taxes 1000
=EBIT 3000

Question 14

EBITDA

Answer 14

EBIT 3000
+Depreciation 2000
+Amortization 0
=EBITDA 5000

Question 15

ROE

Answer 15

ROE = NI / Equity = 1400/5800=24% good

Question 16

Statement of CF

Answer 16

Cash flows from operations:
Net Income adjusted for non-cash items
+/- changes in working capital (e.g. money spent on inventories)

Cash flows from investing activities:
(-) Purchase plant & equipment (Capital Expenditures or Capex)
(+) Sell fixed assets
Buy (cash out) or sell (cash in) short term investments

Cash flows from financing activities:
Cash inflow if we borrow money (bonds and loans) or issue stock
Cash outflow if we pay off debt, buyback stocks or pay dividends

Cash position:
Shows the change in the company’s beginning and ending cash position based on the cash flows from the 3 categories above

Question 17

Cash Flow Measures

Answer 17

Cash flow has many Definitions depending on at what level in your company’s operations/business cash flow is measured. Three key measures include:
Funds from Operations (FFO) = Net Income adjusted for non-cash items such as depreciation and impairments. FFO is your CF prior to investments in working capital and fixed assets (Capex)
(Net) Cash from Operating Activities (CF Ops) = FFO +/- changes to working capital requirements. CF Ops is a firm’s CF prior to investments in new plant and equipment (Capex) and it appears at the bottom of the first section of the CF Statement.
Free Cash Flow (FCF) = CF Ops - investments in new plant and equipment (Capex). Also referred to as Levered FCF or FCF to Equity.