Intuitively why when you increase AP does this decrease your FCFF? I know the formula.
WCInv = CA- CL FCFF = NI + NCC + Int(1-t) -WCInv - FCInv OR FCFF = NI + NCC + Int(1-t) - (CA-CL) - FCInv FCFF = NI + NCC + Int(1-t) - CA + CL - FCInv so if you AP increase, you FCFF increases…it doesn’t decrease… intuitively, your accounts payable increasing, meaning you are paying less to your creditors, meaning you have MORE cash with you…hence FCFF increases…
Ok gotcha thanks. I couldn’t get why with increasing payables you were paying less cash. But I guess thats why its called “Payables.”