Free cash flow

Describe DDM vs Free cash flow

Whereas dividends are the cash flows actually paid to stockholders, free cash flows are the cash flows available for distribution to shareholders.

is FCFF and FCFE easy to get compared to dividend information

no

if cash flow from operation free cash flow?

nope

Which free cash flow method is preferred when capital structure is relatively stable

FCFE

which cash flow model, a company is highly levered and with changing capital

FCFF

earning vs dividend, which is more volitle

earning because most company manages dividend

What is included in net borrowing

long term debt, short term debt and current portion of long term debt

can you use current liability to calculate net borrowing?

Nope

capital expenditure is also called

fixed capital expenditure

what is included in working capital investment

change in operating current asset, includes changes in AR, Invetory, AP

does transaction between company and its shareholder, such as payment of dividends and share repurchases effect free cash flow

they do NOT

when deciding if a stock is fairly price using FCFF, what do you do.

Get FCFF valuation which gives you the FIRM value, minus preferred stock and MV of debt you get equity value

FCFE FCFF which one is simpler

FCFE is the simpler and more direct model than FCFF.

Is short interest baring debt, notes payable, current portion of long term debt, included in working capital calculation

NO, remember working capital calculation only accounts of changes in operating assets. These items are non operating

what to do if they are asking for firm value using FCFF

Firm value = operating asset + non operating asset; therefore once you get firm value using FCFF, add non operating asset to the final awnser

how to calculate wcing

year 2002 [(current asset - cash) - current liability] - year 2001 same = change in working capital

how do you find share price with FCFE

get FCFE, which is equity value, then divide it by # shares outstanding