Untitled Flashcards Set

EBIT = Sales revenues – Operating costs

EBITDA = EBIT + Depreciation + Amortization

Net cash flow = Net income + Depreciation and amortization

NOWC = Operating current assets – Operating current liabilities = (Cash + Accounts receivable + Inventories) – (Accounts payable + Accruals)

Total net operating capital = Net operating working capital + Operating long-term assets

NOPAT = EBIT(1 – Tax rate)

Free cash flow (FCF) = NOPAT – Net investment in operating capital

Net investment in operating capital = (Current year’s total net operating capital – Previous year’s total net operating capital)

FCF = Operating cash flow – Gross investment in operating capital

ROIC = NOPAT / Total net operating capital

Operating profitability ratio (OP) = NOPAT / Sales

Capital requirement ratio (CR) = Total net operating capital / Sales

MVA = Market value of stock – Equity capital supplied by shareholders = (Shares outstanding × Stock price) – Total common equity

MVA = Total market value – Total investor-supplied capital = (Market value of stock + Market value of debt) – Total investor-supplied capital

EVA = NOPAT – (After-tax dollar cost of capital used to support operations)

= EBIT(1 – Tax rate) – (Total net operating capital × WACC)

EVA = (Total net operating capital) × (ROIC – WACC)