Do we need to know the S&P formulas for FI?
highly recommended.
I hope not, I totally blew that section off. I rather have a convertible bond problem.
Yeah, I breezed through those - can’t imagine that they would quiz us on those - all I remember from those is that dividends are subtracted out to get to “discretionary FCF”, which I found totally laughable. Can’t think of anything much more discretionary than dividends.
FML - Add it to the list of sh*t I don’t know
I think it is highly testable CFAI has a chart which all the possible adjustment to those ratios. Be aware of that.
Thanks, I just saw it in the text
is it bad that i have no idea what you’re talking about? uh oh.
pg # please?
You got Secret Sauce? If so, page…141.
^^ I believe it’s reading 52.
bannis, 172 if i’m on the correct page… note. cfai v5
its the end section fter chapter 52 there is s&{ and moodys. i mean if cfai decided to be moody, they coudl test this, but then i EXPECT THEM to give me formulas fk, i dont work at sp or moodys so i have no clue what those firms decide to do. FML.
Volume 5 Pg204
thx. look at the LOS’s on those though. i’m willing to punt those hardcore formulas- i get the concepts. it shows up, you boys can have those points from me.
Agreed - don’t believe we’re going to have to recite the formulas, and I’m also giving those points away to the highest bidder.
bannis, lets give it a shot. Here is the framework that S&P uses to analyze cash flows: Net income + depreciation ± other noncash items Funds from operations + decrease (increase) in noncash current assets + increase (decrease) in nondebt current liabilities Operating cash flow (are funds from operations reduced by changes in WC) – capital expenditures Free operating cash flow (similar to FCFF, not adjusted for interest) – cash dividends Discretionary cash flow – acquisitions + asset disposals + other sources (uses) Prefinancing cash flow (represents the CF from all internal sources) The ratios that are created off of this framework are: Funds from operations / total debt Funds from operations / capital spending requirements (Free operating CF + interest) / interest (Free operating CF + interest) / (interest + annual principal repayment) = debt service coverage Total debt / Discretionary CF = debt payback period i just think the other stuff with regard to HY issuers etc. is more important than this. guess i need to review.
barthezz Wrote: ------------------------------------------------------- > bannis, > lets give it a shot. > > Here is the framework that S&P uses to analyze > cash flows: > > Net income > + depreciation > ± other noncash items > Funds from operations > > + decrease (increase) in noncash current assets > + increase (decrease) in nondebt current > liabilities > Operating cash flow (are funds from operations > reduced by changes in WC) > > – capital expenditures > Free operating cash flow (similar to FCFF, not > adjusted for interest) > > – cash dividends > Discretionary cash flow > > – acquisitions > + asset disposals > + other sources (uses) > Prefinancing cash flow (represents the CF from all > internal sources) > > The ratios that are created off of this framework > are: > > Funds from operations / total debt > Funds from operations / capital spending > requirements > (Free operating CF + interest) / interest > (Free operating CF + interest) / (interest + > annual principal repayment) = debt service > coverage > Total debt / Discretionary CF = debt payback > period > > > i just think the other stuff with regard to HY > issuers etc. is more important than this. guess i > need to review. After looking at this, it doesn’t seem that bad. It’s just some altered version of using CFO to meet debt service coverage needs.
moral of the story is the same- you like cash flows from ops that tend to recur, they help pay your sh*t off (capacity out of the 4 c’s), you want your debt not ridiculously high vs everything else, blah blah blah. i can’t imagine having to jam through a formula to get let’s say discretionary cash flows given other stuff. if yes, then again, take that point. if it’s a ratio/theoretical q, i can wing it. no way we can know everything. this one is not a battle i plan to suit up for.