Module 23.4 Free Cash Flow and Ratios Flashcards
What is Free Cash Flow to the Firm?
What is the formula if calculated from Net Income?
FCFF is the cash available to all investors, both equity owners and debt holder. Can be calculated starting from net income or operating cash flow.
FCFF = NI + NCC + [INT x (1 - tax rate)] - FcINV - WcInv
NI = Net income
NCC = noncash charges (dep & amort)
Int = cash interest paid
FcInv = fixed capital investment
Wc Inv = working capital investment
What is The Free Cash Flow to the Firm calculation if you start from operating cash flow?
FCFF = CFO + [Int x (1 - tax rate)] - FCInv
CFO = cash flow from operations Int = interest paid FCInv = fixed capital investment
What is Free Cash Flow to Equity? What is the formula?
Cash flow that would be distributable to common shareholders.
FCFE = CFO - FCInv + net borrowing
What is the cash flow to revenue ratio?
CFO / Net Revenue
Used to calculate $ in cash per $ in revenue
What is the cash return on assets ratio?
CFO / Average Total Assets
Measures the return of operating cash flow attributed to all providers of capital
What is the cash return on equity ratio?
CFO / Average Total Equity
Measured return of operating cash flow attributed to shareholders
What is the cash to income ratio?
CFO / Operating Income
What is the cash flow per share formula
CFO - preferred dividends / weighted average number of common shares
What is the debt coverage ratio?
CFO / Total Debt
What is the interest coverage ratio?
CFO + interest paid + taxes paid / interest paid
What is the reinvestment ratio?
CFO / Cash paid for long-term assets
Measures firm ability to acquire long term assets
What is the debt payment ratio?
CFO / Cash long-term debt repayment
Measures firms ability to make dividend payments
What is the investment and financing ratio?
CFO / cash outflows form investing and financing activities
Measured ability to purchase assets, satisfy debts, and pay dividends
What is the dividend payment ratio?
CFO / dividends paid
