The document discusses key variables in the free cash flow to firm (FCFF) formula. EBIT represents earnings before interest and taxes and can be found on the income statement or cash flow statement. The FCFF formula adjusts EBIT for taxes by multiplying it by one minus the tax rate. Capital expenditures (Capex) fund long-term operations and are found on the cash flow statement. Working capital funds short-term operations and is calculated as current assets minus current liabilities to represent expenses due within one year or less, with changes found using the balance sheet.
The document discusses key variables in the free cash flow to firm (FCFF) formula. EBIT represents earnings before interest and taxes and can be found on the income statement or cash flow statement. The FCFF formula adjusts EBIT for taxes by multiplying it by one minus the tax rate. Capital expenditures (Capex) fund long-term operations and are found on the cash flow statement. Working capital funds short-term operations and is calculated as current assets minus current liabilities to represent expenses due within one year or less, with changes found using the balance sheet.
The document discusses key variables in the free cash flow to firm (FCFF) formula. EBIT represents earnings before interest and taxes and can be found on the income statement or cash flow statement. The FCFF formula adjusts EBIT for taxes by multiplying it by one minus the tax rate. Capital expenditures (Capex) fund long-term operations and are found on the cash flow statement. Working capital funds short-term operations and is calculated as current assets minus current liabilities to represent expenses due within one year or less, with changes found using the balance sheet.
The document discusses key variables in the free cash flow to firm (FCFF) formula. EBIT represents earnings before interest and taxes and can be found on the income statement or cash flow statement. The FCFF formula adjusts EBIT for taxes by multiplying it by one minus the tax rate. Capital expenditures (Capex) fund long-term operations and are found on the cash flow statement. Working capital funds short-term operations and is calculated as current assets minus current liabilities to represent expenses due within one year or less, with changes found using the balance sheet.
Earnings before interest and taxes, EBIT, is, as it suggests, the
earnings from a company's operations before adjusting for interest expense and taxes. EBIT can be found on the company's income statement or calculated from the cash flow statement. The free cash flow to firm formula does adjust for taxes by multiplying EBIT by one minus the tax rate. Capital expenditures (Capex) is the capital used to fund operations in the long run. Capital expenditures can be found on a company's cash flow statement. Working capital is capital used to fund operations in the short run. Working capital is current assets minus current liabilities. As opposed to longer term capital expenditures, working capital connotes expenses due within one year or less. The change in working capital can be calculated using a company's balance sheet.