Does anyone understand why when you’re calculating projected cash flow, you don’t include: increase in accounts receivable increase in inventories Equipment purchases etc? Thanks!
FCFF = CFO + (interest expense*(1-t))-net capex…not sure which projected cash flows u are talking about, but this would include all u mentioned
Here’s a question Forecasts for a company’s operations over the next 12 months have been developed by a number of departments sales receipts 5,000,000.00 increase in accounts receivable 200,000.00 increase in inventories 100,000.00 salary payments 1,500,000.00 rent and lease payments 400,000.00 transfers to subsidiary for office lease payments 120,000.00 payments for purchases 800,000.00 proceeds from bank loan 700,000.00 equipment purchase 600,000.00 tax payments 800,000.00 based on a cash flow forecast for the next 12 months, the projected net cash flow is closest to… A. $1,080,000 B. $1,380,000 C. $1,480,000 D. $2,080,000
You’ve asked the wrong question. In ‘projecting cash flows’ you most certainly do factor in changes in working cap items like those you’ve listed… but that is not the question that you’ve posted here. What you posted here is simply a direct cash flow question. The fact that it’s what the company has projected for next year has nothing to do with what you include in calculating the cash flow. They could just as easily have stated these were 1993 numbers. Now, what you’re probably confused on is direct versus indirect cash flow accounting. This question wants direct cash flow. Work from there.