(Credit) Cash Flow Analysis

Vita Milk, CFA level 2 candidate, is working on some cash flow analysis for her manager. She is confused about several items on the research report What is Free Operating Cash flow? A) FCFF - Int(1-t) + Net Borrowing B) Discretionary cash flow - cash dividends C) Funds from Operation + noncash current asset/liabilities D) Funds from Operation + noncash current asset/liabilities - capital expenditures What is debt service coverage? A) funds from operation / total debt B) total debt / discretionary cash flow C) (free operating cash flow + interest) / (annual principal repayment + interest) D) (free operating cash flow + interest) / interest Which of the following is not added/subtracted from discretionary cash flow to get prefinancing cash flow? A) extraodinary items B) acquisitions C) asset disposals D) other sources (uses)

  1. D 2. C 3. A/D (not sure about this one)

D, D, A

D D A - not very sure about this one. Please clarify.

THE ANSWERS ARE D, C, A and I made these questions up. No expalnation I just copyed the formulas off Schweser Notes (SS14) I ask coz I was wondering if we need to memorize these formulas!