FCFF/ FCF#: Calculating WCinc and Fixed Capital inv

CFA Level II Equities
#1

Hello All,

I am havig some issues calculating FCFF and FCFE. I know all the equations for the FCFF and FCFE: The issue i keep having is calculating net working capital and FCInv.

Net Working Capital= Current assets (excluding cash and cash equivalents) - Current Liabilities ( excluding Notes payable and Current portion of LTD).

I guess my question here is what is considere Cash Equivalents?

For FCINv: When can i use CFI from as capital expenditures?

#2

Cash Equivalents are highly liquid assets that you can liquidate immediately without any cost. Think of Held for Trading securities

You never use CFI for FCInv calculations

#3

i guess i just keep running in wierd situations.

2103 Mock 1 scheweser Exam booklet volume 1. Question 19

Has FCInv = Cash flow from investing.

Also are inventories considered, cash equivalent?

Thanks,

BA

#4

This is not correct.

Ideally, your cashflow from investments should be equal to changes in Gross PPE + Proceeds from sales.

If cash flow from investments does not include bond and stock issues from other companies, then you can use CFI for your FCInv.

#5

Inventories are not cash Equivalent. Inventories are part of working capital.

#6

How do we account for sale of assets and gains on those sales when calculatig FCInv? I’ve seen many different point and still don’t know which one is correct one…

#7

my understanding is that you remove gains from net income and proceeds from sale should reduce FCInv for that period

#8

Haha, i’m having a similar problem… see my thread on “stupid question”

I need a crash course on calculating working capital from all the possible permutations of given financial statements… i remember the fcf formulas alright but keep calculating wcinv wrong.

#9

I believe it’s sum of non-cash current assets minus the sum of non-debt current liabilities.

#10

I know how you feel! Not a stupid question… it is unclear!