WC calc. in FCFF calc.

on page 391 of volume 4 of the CFA curriculum is written that the working capital calc for FCFF purposes does not include cash and short term debt. Example 51 in the mock exam does calculate WC as change in current assets minus change in current liabilities. That does not seem to be the correct way of doing it. Any thoughts?

I haven’t taken the mock, but I can tell you that the curriculum is correct. FCFF (and FCFE) excludes cash and cash equivalents. Essentially, you’re going to pick up almost all the items on the cash flow statement between Net Income and CFO.

I think there is a thread about this earlier in the week where everyone agreed there was an error. But having not seen the wording. I suppose it is possible that the CA do not have any cash or cash equiv nor does the liabilities have notes and CMLTD. that is to say the assets in the problem consist only of inventory, AR and WIP and libilities are AP. (ignoring tax and PP expenses) Check the problem and let us know what they give you for CA and CL

CA includes cash and CL includes notes payable, so I guess there is an error. Many thanks for the feedback.