FCFF

In FCFF questions, if increase in capital stock is given. what component is that? Where is it considered on the statements?

where are you taking all these questions from Sgupta ?

Mostly from Schweser mocks…

I noticed most of schweser questions give you a lot of useless information. A lot of verbage that just waste your time and a lot of information that you don’t need just to confuse you. Is the cfa exam the same ? hope no

I just looked up the term capital stock on investopedia “common and preferred stock a company is authorized to issue, according to their corporate charter.” So, im guessing it should be a financing cash flow… so i think it can be excluded from your FCFF calc.

"In FCFF questions, if increase in capital stock is given. what component is that? Where is it considered on the statements? " You will see this stuff in great details at Level II, dont bother with it, stick to the basics. Capital stock change will not change FCFF at all. FCFF is cash available to be paid to your equity and debt holders, and it wont make sense to say that cash you get from equity is available to equity holders…if can it fine, if not forget about it…

Thank you all!

The important concept here is that FCFF is a “pre-financing” cash flow. It includes only CF arising from operations (i.e. EBIT-tax), Cap. Expentitures (or asset sales) and investments in (or decreases in ) Net Working Capital. Any “action” in the LT debt or equity accounts will not affect it.