Free Cash Flow

Free cash flow (FCF) is regarded as a very important number in valuation of a company and also evaluating company performance.

It is the cash available to the company after meeting its operating expenses and capital expenditure.

FCF = Operating cash + Changes in working capital – Capital expenditure.

To get a better grasp of operating cash lets go through a typical Profit and loss statement

fcf1

To arrive at operating cash we start with operating income, add depreciation to it because although its a operating expense but a non cash one, which mean no cashflow has occured actually out of company. We less taxes from this number to arrive at operating cash

Operating cash = Operating income + Depreciation – Taxes

Changes in working capital : Working capital include current assets like Accounts receivables and Inventory and Current liabilities like Accounts payable. An increase in current assets is a negative number because more amount is employed in Working capital and increase in current liability is a positive number because by that amount the creditors are funding your business.

Capital expenditure : It is the amount the company has invested in purchase of fixed assets for long term use.

We will try to understand the concept by assuming numbers in P&L and Working capital

fcf2

Therefore the FCF

fcf3

The FCF can be further elaborated by arriving at operating cash in different ways like

Operating cash = EBIT + Depreciation – Taxes   or   EBITDA – Taxes   or   PBT + Interest + Depreciation – Taxes   or   PAT + Interest +Depreciation

fcf4

Hope you enjoyed the post, thanks !

 

 

 

 

SUMIFS, COUNTIFS – ignore criteria

Sumifs and Countifs are used to sum or count using multiple criteria. Recently while making a report i was using multiple drop down menu linked to the criteria field of formula, to give user the flexibility of having a dynamic report. As one of the option I wanted to ignore the criteria and select all the options that were there in the criteria range. After a bit of struggle i found that using wild card “*” (asterik) can be used in drop down menu as it ignore the criteria and select all the options.

bolg

Economic Value Added

Analyzing equation:
EVA = Net Operating Profit after taxes (NOPAT) – Cost of Capital Employed (CoCE)

EVA=NOPAT – ( CE x WACC )

EVA/CE = NOPAT/CE – WACC

EVA/CE = ROIC – WACC

EVA = CE x (ROIC – WACC)

*ROIC – Return on Invested Capital, CE – Capital Employed

Therefore EVA can also be defined as spread between the return
on invested capital and the cost of capital times the amount of invested capital.

prashant99

It appeared in HUL Annual Report 2012-13. Found it worth sharing.

EVA is residual income after charging the Company for the cost
of capital provided by lenders and shareholders.It represents the
value added to the shareholders by generating operating profits
in excess of the cost of capital employed in the business.

EVA will increase if:
a. Operating profits can be made to grow without employing
more capital, i.e. greater efficiency.
b. Additional capital’s invested in projects that return more
than the cost of obtaining new capital, I.e. profitable growth.
c. Capital is curtailed in activities that do not cover the cost of
capital, i.e liquidate unproductive capital.

EVA = Net Operating Profit after taxes (NOPAT) – Cost of Capital Employed (CoCE)

NOPAT is a company’s after- tax operating profit for all investors, including shareholders and debt holders or EBIT x (1-Tax%)

CoCE = Weighted Average Cost of Capital (WACC) x Average
Capital Employed

View original post 35 more words

TEXT function heads up!

I was going through a file that used TEXT formula to calculate the difference between dates. It was a file from human resource department file which calculated the age of the employees using TEXT formula. Initially it looked very easy and useful. I have been using DATEDIF function all this years and in front of TEXT it looked so cumbersome. Then I compared the results from the two functions. To my surprise the results were different.

date1

The results from TEXT formula were higher by one month or more. It appears that TEXT formula while it take care of years but for months it complete the full cycle of 12 months ignoring dates. Although on lighter side someone who is 30 year old would not mind a month or two added to his age but an infant like my daughter certainly would.

Girl Child Growth Record

Hi everyone and HAPPY NEW YEAR!

It’s been long time since my last article. One of my new year resolution is to be more active this year. I have one good news to share with you, I’m blessed with a baby girl. This has kept me busy for last two months. My daughter was born 15 days premature and she was diagnosed with IUGR which has basically to do with the restricted growth of baby inside the womb. This got me worried and totally occupied my mind for last two month. However she is good now. On our recent visit to doctor for vaccination, doctor said she has grown strongly.

Meanwhile I did a lot of research on child’s growth and my post also concerns the same. Child’s growth can be monitored on parameters like weight, length (height), head circumference, BMI relative to age or each other. Based on the data z-score and/or percentiles are calculated.

On the z-score chart you typically have 7 lines. The line labelled ‘0’ on the growth chart is the median which is, generally speaking, the average. The other lines, called z-score lines, indicate distance from the average. A point or trend which is far from the median, such as 3 or –3, indicates a growth problem

The growth curve of a normally growing child will usually follow a track that is roughly parallel to the median. The track may be above or below the median. A flat line indicates that the child is not growing. This is called stagnation and need to be investigated.

Growth percentile are another way of reading child’s growth, it is based on z-score only (standard normal distribution). 50 percentile indicate median growth.

You can find these charts on many websites, why not make one in excel. I have drawn a girls z-score charts because I think they are less cluttered and easier to read and percentiles are also calculated. The data is taken from WHO/CDC website. I have done approximations at some places to complete the data set. With this file you can monitor the growth of your child just like me. It will indicate problem areas if any and help you take corrective actions.

ggr

You can download the file from link below

https://drive.google.com/file/d/0B2FLZ9YjqpJTQTRxNVZySTVWSjQ/view?usp=sharing

Number Formating II

Few months back I wrote a post on rounding numbers to no decimal place with a macro. It is particularly useful when you have too many numbers in a spreadsheet like financial model. Please pardon my ignorance, Excel has a mouse based shortcut to do this.

Home -> Style -> Cell styles -> Number format -> Comma[0]

648523.2363 -> Comma[0] -> 648,523

I m just came to know about it a little late