Professional Documents
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Cash Flow and Financial Planning
Cash Flow and Financial Planning
3-1
Free Cash Flow (FCF)
• FCF is the amount of cash that could be withdrawn
from a firm without harming it’s ability to operate and
to produce future cash flow.
• FCF =OCF - Net fixed asset investment (NFAI)- Net
current asset investment (NCAI)
• FCF = OCF – Capital expenditure-Increase in NWC)
• Net fixed asset investment (NFAI)=Capital
Expenditure
• Net current asset investment (NCAI)=Increase in
NWC
3-2
Operating Cash flow (OCF)
• Cash flow generated from its normal operations
• OCF = NOPAT + Depreciation
• Net Operating Profit After Tax(NOPAT)=EBIT(1-T)
• So, OCF= EBIT(1-T)+Depreciation
3-3
Free Cash Flow
• Capital Expenditure = Change in Long-term assets
3-4
1.Calculate the firm’s NOPAT for the year
ended December 31, 2012
3-5