I’m working on a little project and I’m trying to calculate the free cash flow before dividends (FCF before dividends) for a company. I’m confused as to why cash is excluded from the calculation? Couldn’t cash be used to pay down debt?
FCF before dividends:
This measures excess cash flow generated by the company (excluding non-recurring items) before payments to shareholders or that could be used to pay down debt or pay dividends. It can be calculated as net income (excluding non-recurring items) plus depreciation and amortization minus increase (plus decrease) in non-cash working capital minus capital expenditures