Note from sample 1 (beware: spoiler)

CFA Level II
#1

Just wanted to share something i noticed: tricky little buggers are CFAI asked to calculate FCFF at one point. They gave you all the necessary inputs except WCinv. You were supposed to calculate this on your own. I couldnt get it to work because i was using current assets - current liabilities to find WC… I forgot to exclude cash (you are also supposed to exclude short term debt)… So if you see this on the exam, dont make the same mistake i did. I am not sure i could calculate FCinv on my own if it came up, but i wont miss WCinv again. Anyone know how to calculate FCinv besides its your capital outflows for long term assets?

#2

you could note the difference in gross PP&E from prior year and that could give you CAPEX.

#3

anything else you can think of that could generate FCinv besides PP&E? or should i just be on the lookout for this?

#4

generally it’s PP&E, but it could be any long-term assets, excluding goodwill.

#5

sounds good… thanks

#6

One a related topic does anybody know how to calculate Net Operating Assets? Is it just Total assets - cash?

#7

you have this in the SS 7: Net Operating assets = Operating Assets - Operating Liabs. Operating assets = Total assets - (cash +Marketable secs. +Cash equivalents) Operating Liabs = total Liabs - (debt both short term and long term)

#8

thanks cpk!