This document provides information on various valuation models and cash flow concepts used in discounted cash flow analysis. It defines key terms like FCFF, FCFE, scenario analysis and provides examples of how to calculate free cash flows. It also outlines the differences between FCFF and FCFE and discusses the benefits of scenario analysis for evaluating potential outcomes and making informed decisions.
Financial Statements and Business Model Canvas_Nov5th.pptxRashmi Gowda KM
In detail description about Financial Statements which includes Balance sheet, Income statement, Cash Flow and Statement of Retained Earning. Also there is explanation on Business Model Canvas
Related to chp 13 of fundamental of financial management . The Chapter is about cashflows of corporation. It helps to calculate initial, interim and Terminal cashflows. Later IRR and NPV method is applied. Helps you to easily understand chapter numerical. Is a guide to prepare for exam in a last minute. The Chapter includes self exercise and problems
Financial Statements and Business Model Canvas_Nov5th.pptxRashmi Gowda KM
In detail description about Financial Statements which includes Balance sheet, Income statement, Cash Flow and Statement of Retained Earning. Also there is explanation on Business Model Canvas
Related to chp 13 of fundamental of financial management . The Chapter is about cashflows of corporation. It helps to calculate initial, interim and Terminal cashflows. Later IRR and NPV method is applied. Helps you to easily understand chapter numerical. Is a guide to prepare for exam in a last minute. The Chapter includes self exercise and problems
Cash FlowsIntroductionThe Statement of Cash Flows is the third.docxcravennichole326
Cash Flows
Introduction
The Statement of Cash Flows is the third basic financial statement that is presented with the Balance Sheet and the Income Statement on a periodic basis. By reviewing the changes in cash due to operations, investing activities, and financing activities, the analyst can better ascertain how cash was generated and spent.
The Statement of Cash Flows
The statement of cash flows was developed in the 1970s and 1980s as a reaction to the need for management to reconcile net income to available cash. Many managers questioned how a company could report a profit, but have no money, or report a loss and still have cash available; the statement of cash flows was developed to explain how the income statement related to the available cash. The statement of cash flows can help managers and business owners to understand the sources and uses of cash, and predict future cash requirements so that needs may be met.
The cash flow statement focuses attention on a firm's ability to generate cash internally, its management of current assets and current liabilities, and the details of its investments and its external financing (Libby, Libby, & Short, 2004). It is designed to help both managers and analysts answer important cash-related questions such as these:
Will the company have enough cash to pay its short-term debts to suppliers and other creditors without additional borrowing?
Is the company adequately managing its accounts receivable and inventory?
Has the company made necessary investments in new productive capacity?
Did the company generate enough cash flow internally to finance necessary investment, or did it rely on external financing?
Is the company changing the makeup of its external financing?
These questions and others can be answered through the preparation and examination of the statement of cash flows.
Operating, Investing, and Financing Activities
The statement of cash flows has three main sections: (a) cash flows from operating activities, which are related to earning income from normal, recurring operations; (b) cash flows from investing activities, which are related to the acquisition and sale of productive assets; and (c) cash flows from financing activities, which are related to external financing of the enterprise. The net cash inflow or outflow for the year is the same amount as the increase or decrease in cash and cash equivalents for the year on the balance sheet. Cash equivalents are highly liquid investments with original maturities of less than three months. The operating activities section of the statement of cash flows can be prepared using either the direct or indirect method; the investing and financing activities sections are always prepared directly.
Direct Method of Determining Cash Flows from Operating Activities
The direct method for reporting cash flows from operating activities separates all of the operating transactions that result in either a deb ...
ACC 371 Lecture 7Statement of Cash FlowsIntroductionGenerall.docxaryan532920
ACC 371 Lecture 7
Statement of Cash Flows
Introduction
Generally Accepted Accounting Principles (GAAP) typically evolves in practice, rather than being written and then followed. An example of this evolution is the financial statement called, the statement of cash flows. Managers and business owners often asked why their companies were profitable but did not have available cash, or had plenty of cash but were operating at a loss. In response to this need, accountants developed the statement of cash flows to explain how cash was provided to the company or used by the company. The statement of cash flows is now a required financial statement according to GAAP. Since the statement of cash flows was developed long after the other three statements—the balance sheet, income statement, and statement of stockholders' equity—it does not follow the same flow as the other statements and requires information from all of the other statements, as well as additional information, in order to be compiled. Today, the statement of cash flows is one of the most significant financial statements for the potential investor or creditor.
Usefulness of the Statement of Cash Flows
The statement of cash flows is useful because it shows an organization's ability to produce future cash flows, provides an indication that the organization can meet its obligations, reports the differences between net income and net cash flows, and identifies the cash and noncash investing and financing activities during the period.
Profitable operations do not always ensure positive cash flow. While net income is important, cash flow is also critical to a company's success. Cash flow permits a company to expand operations, replace worn assets, take advantage of new investment opportunities, and pay dividends to its owners. Both managers and analysts need to understand the various sources and uses of cash that are associated with business activities.
The cash flow statement focuses attention on a firm's ability to generate cash internally, its management of current assets and current liabilities, and the details of its investments and its external financing (Libby, Libby, & Short, 2004). It is designed to help both managers and analysts answer important cash-related questions such as these:
Will the company have enough cash to pay its short-term debts to suppliers and other creditors without additional borrowing?
Is the company adequately managing its accounts receivable and inventory?
Has the company made necessary investments in new productive capacity?
Did the company generate enough cash flow internally to finance necessary investment or did it rely on external financing?
Is the company changing the makeup of its external financing?
These questions and others can be answered through the preparation and examination of the statement of cash flows.
Operating, Investing, and Financing Activities
The statement has three main sections: (a) cash flows from operating activities, which are relate.
Role of Financial Statements
Auditors Report
Management Discussion and Analysis
Balance Sheet
Statement of Profit and Loss
Cash Flow statement
Accounting Polices
How to define Assets , Liabilities , Investments , Revenues , Expenses , Taxes, Cash Flow statements
Organisational Performance Measures. This is only for study purpose, The content is refereed from various available sources. Through this, the learner, decision makers are may got benefited.
The digital marketing industry is changing faster than ever and those who don’t adapt with the times are losing market share. Where should marketers be focusing their efforts? What strategies are the experts seeing get the best results? Get up-to-speed with the latest industry insights, trends and predictions for the future in this panel discussion with some leading digital marketing experts.
Cash FlowsIntroductionThe Statement of Cash Flows is the third.docxcravennichole326
Cash Flows
Introduction
The Statement of Cash Flows is the third basic financial statement that is presented with the Balance Sheet and the Income Statement on a periodic basis. By reviewing the changes in cash due to operations, investing activities, and financing activities, the analyst can better ascertain how cash was generated and spent.
The Statement of Cash Flows
The statement of cash flows was developed in the 1970s and 1980s as a reaction to the need for management to reconcile net income to available cash. Many managers questioned how a company could report a profit, but have no money, or report a loss and still have cash available; the statement of cash flows was developed to explain how the income statement related to the available cash. The statement of cash flows can help managers and business owners to understand the sources and uses of cash, and predict future cash requirements so that needs may be met.
The cash flow statement focuses attention on a firm's ability to generate cash internally, its management of current assets and current liabilities, and the details of its investments and its external financing (Libby, Libby, & Short, 2004). It is designed to help both managers and analysts answer important cash-related questions such as these:
Will the company have enough cash to pay its short-term debts to suppliers and other creditors without additional borrowing?
Is the company adequately managing its accounts receivable and inventory?
Has the company made necessary investments in new productive capacity?
Did the company generate enough cash flow internally to finance necessary investment, or did it rely on external financing?
Is the company changing the makeup of its external financing?
These questions and others can be answered through the preparation and examination of the statement of cash flows.
Operating, Investing, and Financing Activities
The statement of cash flows has three main sections: (a) cash flows from operating activities, which are related to earning income from normal, recurring operations; (b) cash flows from investing activities, which are related to the acquisition and sale of productive assets; and (c) cash flows from financing activities, which are related to external financing of the enterprise. The net cash inflow or outflow for the year is the same amount as the increase or decrease in cash and cash equivalents for the year on the balance sheet. Cash equivalents are highly liquid investments with original maturities of less than three months. The operating activities section of the statement of cash flows can be prepared using either the direct or indirect method; the investing and financing activities sections are always prepared directly.
Direct Method of Determining Cash Flows from Operating Activities
The direct method for reporting cash flows from operating activities separates all of the operating transactions that result in either a deb ...
ACC 371 Lecture 7Statement of Cash FlowsIntroductionGenerall.docxaryan532920
ACC 371 Lecture 7
Statement of Cash Flows
Introduction
Generally Accepted Accounting Principles (GAAP) typically evolves in practice, rather than being written and then followed. An example of this evolution is the financial statement called, the statement of cash flows. Managers and business owners often asked why their companies were profitable but did not have available cash, or had plenty of cash but were operating at a loss. In response to this need, accountants developed the statement of cash flows to explain how cash was provided to the company or used by the company. The statement of cash flows is now a required financial statement according to GAAP. Since the statement of cash flows was developed long after the other three statements—the balance sheet, income statement, and statement of stockholders' equity—it does not follow the same flow as the other statements and requires information from all of the other statements, as well as additional information, in order to be compiled. Today, the statement of cash flows is one of the most significant financial statements for the potential investor or creditor.
Usefulness of the Statement of Cash Flows
The statement of cash flows is useful because it shows an organization's ability to produce future cash flows, provides an indication that the organization can meet its obligations, reports the differences between net income and net cash flows, and identifies the cash and noncash investing and financing activities during the period.
Profitable operations do not always ensure positive cash flow. While net income is important, cash flow is also critical to a company's success. Cash flow permits a company to expand operations, replace worn assets, take advantage of new investment opportunities, and pay dividends to its owners. Both managers and analysts need to understand the various sources and uses of cash that are associated with business activities.
The cash flow statement focuses attention on a firm's ability to generate cash internally, its management of current assets and current liabilities, and the details of its investments and its external financing (Libby, Libby, & Short, 2004). It is designed to help both managers and analysts answer important cash-related questions such as these:
Will the company have enough cash to pay its short-term debts to suppliers and other creditors without additional borrowing?
Is the company adequately managing its accounts receivable and inventory?
Has the company made necessary investments in new productive capacity?
Did the company generate enough cash flow internally to finance necessary investment or did it rely on external financing?
Is the company changing the makeup of its external financing?
These questions and others can be answered through the preparation and examination of the statement of cash flows.
Operating, Investing, and Financing Activities
The statement has three main sections: (a) cash flows from operating activities, which are relate.
Role of Financial Statements
Auditors Report
Management Discussion and Analysis
Balance Sheet
Statement of Profit and Loss
Cash Flow statement
Accounting Polices
How to define Assets , Liabilities , Investments , Revenues , Expenses , Taxes, Cash Flow statements
Organisational Performance Measures. This is only for study purpose, The content is refereed from various available sources. Through this, the learner, decision makers are may got benefited.
The digital marketing industry is changing faster than ever and those who don’t adapt with the times are losing market share. Where should marketers be focusing their efforts? What strategies are the experts seeing get the best results? Get up-to-speed with the latest industry insights, trends and predictions for the future in this panel discussion with some leading digital marketing experts.
When most people in the industry talk about online or digital reputation management, what they're really saying is Google search and PPC. And it's usually reactive, left dealing with the aftermath of negative information published somewhere online. That's outdated. It leaves executives, organizations and other high-profile individuals at a high risk of a digital reputation attack that spans channels and tactics. But the tools needed to safeguard against an attack are more cybersecurity-oriented than most marketing and communications professionals can manage. Business leaders Leaders grasp the importance; 83% of executives place reputation in their top five areas of risk, yet only 23% are confident in their ability to address it. To succeed in 2024 and beyond, you need to turn online reputation on its axis and think like an attacker.\
Key Takeaways:
- New framework for examining and safeguarding an online reputation
- Tools and techniques to keep you a step ahead
- Practical examples that demonstrate when to act, how to act and how to recover
Is AI-Generated Content the Future of Content Creation?Cut-the-SaaS
Discover the transformative power of AI in content creation with our presentation, "Is AI-Generated Content the Future of Content Creation?" by Puran Parsani, CEO & Editor of Cut-The-SaaS. Learn how AI-generated content is revolutionizing marketing, publishing, education, healthcare, and finance by offering unprecedented efficiency, creativity, and scalability.
Understanding
AI-Generated Content:
AI-generated content includes text, images, videos, and audio produced by AI without direct human involvement. This technology leverages large datasets to create contextually relevant and coherent material, streamlining content production.
Key Benefits:
Content Creation: Rapidly generate high-quality content for blogs, articles, and social media.
Brainstorming: AI simulates conversations to inspire creative ideas.
Research Assistance: Efficiently summarize and research information.
Market Insights:
The content marketing industry is projected to grow to $17.6 billion by 2032, with AI-generated content expected to dominate over 55% of the market.
Case Study: CNET’s AI Content Controversy:
CNET’s use of AI for news articles led to public scrutiny due to factual inaccuracies, highlighting the need for transparency and human oversight.
Benefits Across Industries:
Marketing: Personalize content at scale and optimize engagement with predictive analytics.
Publishing: Automate content creation for faster publication cycles.
Education: Efficiently generate educational materials.
Healthcare: Create accurate content for patients and professionals.
Finance: Produce timely financial content for decision-making.
Challenges and Ethical Considerations:
Transparency: Disclose AI use to maintain trust.
Bias: Address potential AI biases with diverse datasets.
SEO: Ensure AI content meets SEO standards.
Quality: Maintain high standards to prevent misinformation.
Conclusion:
AI-generated content offers significant benefits in efficiency, personalization, and scalability. However, ethical considerations and quality assurance are crucial for responsible use. Explore the future of content creation with us and see how AI is transforming various industries.
Connect with Us:
Follow Cut-The-SaaS on LinkedIn, Instagram, YouTube, Twitter, and Medium. Visit cut-the-saas.com for more insights and resources.
It's another new era of digital and marketers are faced with making big bets on their digital strategy. If you are looking at modernizing your tech stack to support your digital evolution, there are a few can't miss (often overlooked) areas that should be part of every conversation. We'll cover setting your vision, avoiding siloes, adding a democratized approach to data strategy, localization, creating critical governance requirements and more. Attendees will walk away with actions they can take into initiatives they are running today and consider for the future.
[Google March 2024 Update] How To Thrive: Content, Link Building & SEOSearch Engine Journal
March 2024 disrupted the SEO industry. Websites were deindexed, and manual penalties were delivered—all to produce more helpful, more trustworthy search results.
How did your website fare?
Watch us as we delve into the seismic shifts brought about by Google's March 2024 updates and explore strategies to not just survive, but thrive in this dynamic digital landscape.
You’ll learn:
- How to create content that is valuable to users (not just search engines) using E-E-A-T.
- How to build links that can boost rankings and withstand algorithm updates.
- Best practices for content creation and link building so you can thrive during algorithm updates.
With Vince Ramos, we'll examine the implications of the latest algorithm changes on content creation, link building, and SEO practices, and offer actionable insights from businesses like yours that have remained steadfast amidst the volatility.
Using real-life case studies, we’ll also show you the effectiveness of manual link building techniques and person-first content strategies.
Whether you're a seasoned SEO professional, a budding content creator, or anyone in between, this webinar will help you weather the changes in Google's algorithms and capitalize on them for sustained success.
Check out this webinar and unlock the secrets to thriving in the new Google era.
The digital marketing industry is changing faster than ever and those who don’t adapt with the times are losing market share. Where should marketers be focusing their efforts? What strategies are the experts seeing get the best results? Get up-to-speed with the latest industry insights, trends and predictions for the future in this panel discussion with some leading digital marketing experts.
Mastering Local SEO for Service Businesses in the AI Era is tailored specifically for local service providers like plumbers, dentists, and others seeking to dominate their local search landscape. This session delves into leveraging AI advancements to enhance your online visibility and search rankings through the Content Factory model, designed for creating high-impact, SEO-driven content. Discover the Dollar-a-Day advertising strategy, a cost-effective approach to boost your local SEO efforts and attract more customers with minimal investment. Gain practical insights on optimizing your online presence to meet the specific needs of local service seekers, ensuring your business not only appears but stands out in local searches. This concise, action-oriented workshop is your roadmap to navigating the complexities of digital marketing in the AI age, driving more leads, conversions, and ultimately, success for your local service business.
Key Takeaways:
Embrace AI for Local SEO: Learn to harness the power of AI technologies to optimize your website and content for local search. Understand the pivotal role AI plays in analyzing search trends and consumer behavior, enabling you to tailor your SEO strategies to meet the specific demands of your target local audience. Leverage the Content Factory Model: Discover the step-by-step process of creating SEO-optimized content at scale. This approach ensures a steady stream of high-quality content that engages local customers and boosts your search rankings. Get an action guide on implementing this model, complete with templates and scheduling strategies to maintain a consistent online presence. Maximize ROI with Dollar-a-Day Advertising: Dive into the cost-effective Dollar-a-Day advertising strategy that amplifies your visibility in local searches without breaking the bank. Learn how to strategically allocate your budget across platforms to target potential local customers effectively. The session includes an action guide on setting up, monitoring, and optimizing your ad campaigns to ensure maximum impact with minimal investment.
A.I. (artificial intelligence) platforms are popping up all the time, and many of them can and should be used to help grow your brand, increase your sales and decrease your marketing costs.In this presentation:We will review some of the best AI platforms that are available for you to use.We will interact with some of the platforms in real-time, so attendees can see how they work.We will also look at some current brands that are using AI to help them create marketing messages, saving them time and money in the process. Lastly, we will discuss the pros and cons of using AI in marketing & branding and have a lively conversation that includes comments from the audience.
Key Takeaways:
Attendees will learn about LLM platforms, like ChatGPT, and how they work, with preset examples and real time interactions with the platform. Attendees will learn about other AI platforms that are creating graphic design elements at the push of a button...pre-set examples and real-time interactions.Attendees will discuss the pros & cons of AI in marketing + branding and share their perspectives with one another. Attendees will learn about the cost savings and the time savings associated with using AI, should they choose to.
Mastering Local SEO for Service Businesses in the AI Era is tailored specifically for local service providers like plumbers, dentists, and others seeking to dominate their local search landscape. This session delves into leveraging AI advancements to enhance your online visibility and search rankings through the Content Factory model, designed for creating high-impact, SEO-driven content. Discover the Dollar-a-Day advertising strategy, a cost-effective approach to boost your local SEO efforts and attract more customers with minimal investment. Gain practical insights on optimizing your online presence to meet the specific needs of local service seekers, ensuring your business not only appears but stands out in local searches. This concise, action-oriented workshop is your roadmap to navigating the complexities of digital marketing in the AI age, driving more leads, conversions, and ultimately, success for your local service business.
Key Takeaways:
Embrace AI for Local SEO: Learn to harness the power of AI technologies to optimize your website and content for local search. Understand the pivotal role AI plays in analyzing search trends and consumer behavior, enabling you to tailor your SEO strategies to meet the specific demands of your target local audience. Leverage the Content Factory Model: Discover the step-by-step process of creating SEO-optimized content at scale. This approach ensures a steady stream of high-quality content that engages local customers and boosts your search rankings. Get an action guide on implementing this model, complete with templates and scheduling strategies to maintain a consistent online presence. Maximize ROI with Dollar-a-Day Advertising: Dive into the cost-effective Dollar-a-Day advertising strategy that amplifies your visibility in local searches without breaking the bank. Learn how to strategically allocate your budget across platforms to target potential local customers effectively. The session includes an action guide on setting up, monitoring, and optimizing your ad campaigns to ensure maximum impact with minimal investment.
The Secret to Engaging Modern Consumers: Journey Mapping and Personalization
In today's digital landscape, understanding the customer's journey and delivering personalized experiences are paramount. This masterclass delves into the art of consumer journey mapping, a powerful technique that visualizes the entire customer experience across touchpoints. Attendees will learn how to create detailed journey maps, identify pain points, and uncover opportunities for optimization. The presentation also explores personalization strategies that leverage data and technology to tailor content, products, and experiences to individual customers. From real-time personalization to predictive analytics, attendees will gain insights into cutting-edge approaches that drive engagement and loyalty.
Key Takeaways:
Current consumer landscape; Steps to mapping an effective consumer journey; Understanding the value of personalization; Integrating mapping and personalization for success; Brands that are getting It right!; Best Practices; Future Trends
10 Video Ideas Any Business Can Make RIGHT NOW!
You'll never draw a blank again on what kind of video to make for your business. Go beyond the basic categories and truly reimagine a brand new advanced way to brainstorm video content creation. During this masterclass you'll be challenged to think creatively and outside of the box and view your videos through lenses you may have never thought of previously. It's guaranteed that you'll leave with more than 10 video ideas, but I like to under-promise and over-deliver. Don't miss this session.
Key Takeaways:
How to use the Video Matrix
How to use additional "Lenses"
Where to source original video ideas
The session includes a brief history of the evolution of search before diving into the roles technology, content, and links play in developing a powerful SEO strategy in a world of Generative AI and social search. Discover how to optimize for TikTok searches, Google's Gemini, and Search Generative Experience while developing a powerful arsenal of tools and templates to help maximize the effectiveness of your SEO initiatives.
Key Takeaways:
Understand how search engines work
Be able to find out where your users search
Know what is required for each discipline of SEO
Feel confident creating an SEO Plan
Confidently measure SEO performance
In this presentation, Danny Leibrandt explains the impact of AI on SEO and what Google has been doing about it. Learn how to take your SEO game to the next level and win over Google with his new strategy anyone can use. Get actionable steps to rank your name, your business, and your clients on Google - the right way.
Key Takeaways:
1. Real content is king
2. Find ways to show EEAT
3. Repurpose across all platforms
Financial curveballs sent many American families reeling in 2023. Household budgets were squeezed by rising interest rates, surging prices on everyday goods, and a stagnating housing market. Consumers were feeling strapped. That sentiment, however, appears to be waning. The question is, to what extent?
To take the pulse of consumers’ feelings about their financial well-being ahead of a highly anticipated election, ThinkNow conducted a nationally representative quantitative survey. The survey highlights consumers’ hopes and anxieties as we move into 2024. Let's unpack the key findings to gain insights about where we stand.
When most people in the industry talk about online or digital reputation management, what they're really saying is Google search and PPC. And it's usually reactive, left dealing with the aftermath of negative information published somewhere online. That's outdated. It leaves executives, organizations and other high-profile individuals at a high risk of a digital reputation attack that spans channels and tactics. But the tools needed to safeguard against an attack are more cybersecurity-oriented than most marketing and communications professionals can manage. Business leaders Leaders grasp the importance; 83% of executives place reputation in their top five areas of risk, yet only 23% are confident in their ability to address it. To succeed in 2024 and beyond, you need to turn online reputation on its axis and think like an attacker.
Key Takeaways:
- New framework for examining and safeguarding an online reputation
- Tools and techniques to keep you a step ahead
- Practical examples that demonstrate when to act, how to act and how to recover
How to Use AI to Write a High-Quality Article that Ranksminatamang0021
In the world of content creation, many AI bloggers have drifted away from their original vision, resulting in low-quality articles that search engines overlook. Don't let that happen to you! Join us to discover how to leverage AI tools effectively to craft high-quality content that not only captures your audience's attention but also ranks well on search engines.
Disclaimer: Some of the prompts mentioned here are the examples of Matt Diggity. Please use it as reference and make your own custom prompts.
6. DCF (Discounted Cash Flow) Valuation
Discounted cash flow (DCF) valuation views the intrinsic value of a security as the
present value of its expected future cash flows. When applied to dividends, the DCF
model is the discounted dividend approach or dividend discount model (DDM). Our
coverage extends DCF analysis to value a company and its equity securities by
valuing free cash flow to the firm (FCFF) and free cash flow to equity (FCFE).
Whereas dividends are the cash flows actually paid to stockholders, free cash flows
are the cash flows available for distribution to shareholders.
Unlike dividends, FCFF and FCFE are not readily available data. Analysts need to
compute these quantities from available financial information, which requires a clear
understanding of free cash flows and the ability to interpret and use the information
correctly. Forecasting future free cash flows is a rich and demanding exercise. The
analyst’s understanding of a company’s financial statements, its operations, its
financing, and its industry can pay real “dividends” as he or she addresses that task.
Free cash flows provide an economically sound basis for valuation.
7. Analysts like to use free cash flow as the return (either FCFF or FCFE)
whenever one or more of the following conditions is present:
• The company does not pay dividends.
• The company pays dividends, but the dividends paid differ significantly
from the company’s capacity to pay dividends.
• Free cash flows align with profitability within a reasonable forecast
period with which the analyst is comfortable.
• The investor takes a “control” perspective. With control comes
discretion over the uses of free cash flow. If an investor can take
control of the company (or expects another investor to do so),
dividends may be changed substantially; for example, they may be set
at a level approximating the company’s capacity to pay dividends.
Such an investor can also apply free cash flows to uses such as
servicing the debt incurred in an acquisition.
8. FREE CASH FLOW (FCF)
• Free Cash Flow (FCF) is calculated after accounting for non-cash
expenses, changes in operating assets and liabilities, and capital
expenditures, free cash flow is the quantum of cash flow generated
(net of taxes) by a company. Simply put, free cash flow refers to the
funds that remain after all payments, investments, and other
obligations have been met. The monies left over for distribution among
stockholders, bondholders, and investors are referred to as free cash
flow.
• Because they exclude substantial capital expenditures and changes in
cash owing to changes in operating assets and liabilities, Free Cash
Flow is a more accurate indicator than EBITDA, EBIT, and Net
Income. Non-cash expenses are also included in measurements like
EBIT and Net Income, which further distorts the view of the underlying
cash flow of a company.
9. FCFF & FCFE
After paying off cash operating expenses and capital expenditures, FCFF is the
cash flow available for optional pay-out to all investors in a corporation, both equity
and debt. FCFF is also referred to as an unleveraged cash flow because interest
payments and leverage effects are not taken into account when calculating it.
FCFE, on the other hand, is a type of discretionary cash flow that is solely available
to a company’s stockholders. After all financial obligations and capital requirements
have been met, this is the remaining cash flow. In order to calculate FCFE, interest
payments or loan repayments are taken into account.
Investors have traditionally focused on indicators such as EBITDA and net income
when appraising equities. While these measures are important for trading
comparisons, the free cash flow (FCF) employed in the discounted cash flow
approach (DCF) is a more accurate assessment of corporate profitability. FCF
differs from operating EBITDA, EBIT, and net income in that it excludes non-cash
expenses and subtracts the capital investment required to maintain the business.
FCF has also gained traction as a viable alternative to the dividend discount model
of valuation, particularly for non-dividend generating companies.
10. FCFF(FREE CASH FLOW FOR FIRM)
• After operational and investing expenses are paid, free cash flow is the amount of money
available to investors. Free cash flow to the firm (i.e., FCFF) and Free cash flow to equity
(i.e., FCFE) are two different forms of free cash flow measurements used in valuation.
We usually refer to FCFF when we speak of free cash flow (FCF). Operating EBIT is
normally adjusted for non-cash expenses as well as fixed and working capital
investments to arrive at FCFF.
• FCFF = Operating EBIT – Tax + Depreciation or Amortization (non-cash expenses) –
Fixed capital expenditures – Increase in net working capital
• Alternatively, FCFF = Cash flow from operations (taken from cash flow statement) +
Interest expense adjusted for tax – Fixed capital expenditures
• FCFF = Net Income + Interest expense adjusted for tax + non-cash expenses – Fixed
capital expenditures – Increase in net working capital
• Thus, FCFF stands for free cash flow for the firm and it is a financial performance metric
that looks at the amount of cash created by a company after all expenses, taxes,
changes in net working capital, and changes in investments have been taken into
account.
• After all other outflows have been controlled and paid, the FCFF is the amount that is
dispersed to the firm’s stockholders and bondholders. Calculating the FCFF is necessary
for any business because it serves as a tool for measuring its profitability and financial
stability. If the FCFF has a positive value, it means the company has a surplus after
expenses are stripped away; if the FCFF has a negative value, the company is in danger
of not having enough revenue to cover expenses or investments[1].
11. FREE CASH FLOW FOR EQUITY (FCFE)
• FCFE is a term that stands for free cash flow to equity and it indicates the amount that is distributed to
equity shareholders once all expenses, changes in net working capital, debt repayments, etc. are
decreased and new loans are added.
• The calculation of FCFE is important since it will aid in determining the firm’s value. FCFE is often
used by experts to assess the value of a firm or company, and it can be used in place of dividends for
this objective. When FCFE is used in stock valuation, this is demonstrated. Instead of dividends, as in
the dividends discount model, the FCFE model of stock valuation uses free cash flow to equity to
value stock.
• We arrive at enterprise value whenever we apply DCF using FCFF by discounting the cash flows with
the weighted average cost of capital (i.e., WACC). Because FCFF considers the complete capital
structure of the company, the costs of all sources of capital are included in the discount rate.
• This cash flow, i.e., FCFE is also known as levered cash flow because it includes the impact of
leverage. As a result, if the firm’s primary source of capital is common equity, its FCFF and FCFE are
likely to be equal.
• But when we use the FCFE model to construct a DCF, we discount the cash flows with the cost of
equity to arrive at an equity value. Because FCFE is the amount left over for only equity shareholders,
only the cost of equity is treated as a discount rate.
• Normally, FCFE is calculated after adjusting the post-tax operating EBIT of a company in respect of
non-cash costs, interest expenses, capital investments, & net debt repayments.
• FCFE = Operating EBIT – Interest – Tax + Depreciation or Amortization (non-cash expenses) – Fixed
capital expenditures – Increase in networking capital – Net debt repayment
• Alternatively, FCFE = Cash flow from operations – Fixed capital expenditures – Net debt repayments +
New debt
12. Important Points Related To FCFF And
FCFE
• In the marketplace, both FCFF and FCFE are popular options. Following are some of the
important points related to them:
• FCFF indicates the value remaining out for all of the firm’s investors, including
bondholders and shareholders, whereas FCFE denotes the amount left over for the firm’s
common equity holders only.
• FCFF ignores the effect of leverage because it does not include the financial obligations
when calculating residual cash flow, and is hence also referred to as unleveraged cash
flow. On the contrary, FCFE is referred to as levered cash flow since it considers the
impact of leverage by removing the net financial liabilities.
• In the DCF valuation, FCFF is used to compute enterprise value or the firm’s entire
intrinsic value. Similarly, in the DCF valuation, the FCFE model is used to calculate the
equity value or the intrinsic value of a company that is available to common equity
shareholders.
• To maintain consistency in considering all capital sources for enterprise valuation, FCFF
is combined with a weighted average cost of capital while doing DCF valuation. FCFE,
on the other hand, is used in conjunction with the cost of equity to ensure that only
common equity shareholders’ claims are taken into account.
• When presenting their activities, management of highly leveraged organizations likes to
employ FCFF. It is necessary to verify that the company does not have a negative
levered free cash flow as a result of large financial obligations, as this could make the
organization unsustainable in the long run.
13. Conclusion
• FCFF is the firm’s free cash flow generated from operations after all
capital expenditures essential for the firm’s survival have been paid
out, and the cash flow is available to all capital providers, including
debt and equity. Because it does not account for financial obligations
of interest and principal repayments at the time of computation of cash
flow, this indicator implicitly eliminates the impact of the firm’s financial
leverage. As a result, unleveraged cash flow is also a term used to
describe it.
• FCFE is the free cash flow available only to common equity
shareholders of a company, and it takes into account the impact of
financial leverage by deducting all the financial liabilities from the cash
flow. As a reason, it is also known as leveraged cash flow. By
deducting tax-adjusted interest expenditure and net debt repayments
from FCFF, FCFE may be easily calculated.
15. Scenario analysis
• Scenario analysis is the process of estimating the expected value of a
portfolio after a given change in the values of key factors take place.
Both likely scenarios and unlikely worst-case events can be tested in
this fashion—often relying on computer simulations.
16. SCENARIO ANALYSIS
The what-if scenario analysis is a project management process that
evaluates different scenarios to predict their effects – both positive
and negative – on the project objectives.
This is one of the modelling techniques used in the Develop Schedule
process.
What-if analysis is used to explore and compare
various plan and schedule alternatives based on
changing conditions.
It can be applied in the primary project phases to try
out scenarios and optimize your plan. During
execution, it is an important tool used to predict the
consequence of any event (late delivery etc.)
17. What-If Scenario Analysis
• What-if scenario analysis can range from a simple
evaluation of the effects of changing the duration of
one or more activities to a more complex analysis.
This could include introducing duration uncertainty,
running project forecasts based on performance-to-
date, all the way to a schedule and cost risk
analysis, taking identified project and enterprise
risks into account.
• The majority of questions asked are exploratory in
nature and are intended to examine the results of
predictions in the future.
18. • What if the Debt & Equity percentage differs & its
impact on net profit?
• What if lead time for major equipment or components is
extended?
• What if we sub-contract parts of the prefab or
fabrication work?
• What if we need to extend the duration of certain
engineering activities?
• What is the effect on completion date and resources if
the current performance trend continues?
• What if prefabrication work seven days a week instead of
five?
• What if we accelerate the schedule?
• The questions often involve making changes to data,
running the analysis, examining the predictions,
comparing it to the schedule, and then challenging the
effect.
19. Benefits of What-If Scenario Analysis
1. Evaluation of Possible Outcomes
A project manager can use WISA to see how a given outcome
might be affected by changes in particular variables.
This provides them with greater insight into the possible
uncertainties they're likely to encounter and the impact
of these risks on the successful completion of the
project.
2. Better Informed Decisions/Actions
Thanks to what-if analysis, project managers can make
more informed decisions about the future of the project,
reducing uncertainty. They can respond to alternative
situations more quickly and effectively because they've
developed strategies to minimize the impact of change.
20. 3. Improved Project Predictability
A what-if scenario is informal speculation about how a given
situation might be handled. The more questions that are asked,
answered, and reviewed throughout each stage of the project
lifecycle, the more informed the project manager, and the more
predictable the project outcome.
4. Analysis of Simple and Complex Factors
WISA is an umbrella term for a type of evaluation that measures the
effect on a project outcome should one of the primary elements be
changed. At its most complex, Monte Carlo analysis can be utilised
to provide analysis throughout unlimited scenarios. To answer basic
questions, a simpler method of what-if analysis can also be used to
extract the necessary information more rapidly.
5. Improved Project Management
What-if analysis allows project managers to recognize options and
impact from events and changing assumptions. With proper
utilization, project managers can make more informed decisions and
predict the outcome of those decisions more accurately.
Project management will always be characterized by a degree of
uncertainty, changes, impact from events, and deviation from the
plan. The challenge is managing each factor and understanding its
impact on the project.
21. Managers typically start with three basic scenarios:
• Base case scenario – It is the average scenario, based on
management assumptions. An example – when calculating the net
most likely to be used are the discount rate, cash flow growth rate,
• Worst case scenario – Considers the most serious or severe
outcome that may happen in a given situation. An example – when
present value, one would take the highest possible discount rate
cash flow growth rate or the highest expected tax rate.
• Best case scenario – It is the ideal projected scenario and is almost
always put into action by management to achieve their objectives.
calculating the net present value, use the lowest possible discount
possible growth rate, and the lowest possible tax rate.
22. What are the Drawbacks of Scenario Analysis?
• Requires a high level of skill – Scenario analysis tends to be a
demanding and time-consuming process that requires high-
• Unforeseen outcomes – Due to the difficulty in forecasting what
may occur in the future, the actual outcome may be fully
in the financial modeling.
• Cannot model every scenario – It may be very difficult to
envision all possible scenarios and assign probabilities to them.
understand that there are risk factors associated with the
consider a certain amount of risk tolerance in order to be able
goal.