Which of the following is the correct formula for FCF ? 1. CFO - Dividends - Net Capital Expenditures 2. CFO - Net Capital Expenditures I thought it is 1. but there was a question in a Schweser exam which ignores Dividend payment. I’m confused. greatly appreciate clarification. Thanks!

i know there was another discussion about it From what i know the second one is correct


dinesh did you take the first CFA sample exam?I was going to today but it will be delayed

nope florin, I am off today. I will be taking the Schweser-Book-6 1st Exam (probably just AM) tommorow after office. Will post the score the moment I am done with any of the exams.

I took CFA exams 1,2&3.

wow sarathk, how did you fare in them?

Thanks guys!

dinesh, V1 - 76% V2 - 68% V3 - 70% lot to improve on the timing though.

you did good sarathk congrats

good one sarathk … you passed the 3rd Exam … which I heard is pretty nasty?

I got killed on FSA on the 3rd exam. But otherwise I didn’t think it was more difficult than the other exams.

FCF should exclude dividends because those are theoretically discretionary outflows. In practice, a lot of companies will use the following as a FCF measure. (Illustration only, don’t use this on the exam!) EBITDA + non-cash expenses such as stock-based comp - capital expenditures That amount is the cash your business is throwing off. Management can use it for dividends, reinvestment, etc. HTH