Through my understanding NWC (that gets subtracted from FCFF and FCFE) is: (change in Inv + change in A/R)- (change in A/P + change in Accrued taxes) is this correct? you omit notes payable? do you also include ST debt?
Also for FCinv, is this just the change in GROSS PPE, so you have to add back depreciation?
Thank again.
Just for clarification: Not the NWC is substracted but the delta in NWC from one period to another, which is basically the capital need (or relase in case of negative) in that period. Other then that your definition above is correct. Short-term debt is not included in the NWC definition as this is part of the financing structure of the business (in contrast to NWC which refers to the operating structure). In general interest-bearing debt as notes payable or ST-debt will not be part of the NWC definition but part of the net debt defintion.
Yes
Regards,
Oscar
Thank you Oscar, I appreciate it.
For change in gross ppe you don’t add back depreciation.
had this same question: someone answered it as either change in gross PPE or change in net PPE + depreciation
Both are mathematically equivalent. However, in “real life” cash-flow calculations you’ll find it normally separatetd in D&A and CAPEX (= delta in gross PPE).