Free Cash Flow

Рет қаралды 253,362

10 жыл бұрын

This video defines free cash flow, provides an equation for calculating free cash flow, and illustrates the equation with an example.
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Пікірлер: 86

@alexg2339 5 жыл бұрын

Off all the videos on KZfaq your explanation was the clearest

@chiaradebrabant-bibi8423 4 жыл бұрын

I was watching the recording of my professor at Ghent university. She didnt explain it well, i was like no time to waiste, let me head to youtube. So thank you for making this content!

@jerarrdpandohe4256 3 жыл бұрын

Love your videos, from Managerial Accounting to Financial management 🔥🔥🔥

@rob8482 7 жыл бұрын

Fantastic, thank you so much for these videos! Always makes sense, you have a real talent.

@intellectualninjamonkey2496 Жыл бұрын

This is just perfect instruction. I do not know why they do not teach like that in university. This was so clear and straightforward.

@JasonJafry Жыл бұрын

Exactly! why don't they just make it this simple?

@andypotanin 5 жыл бұрын

Thank you, sir - you got yourself a new subscriber.

@dhavalrohilla696 Жыл бұрын

I have tears in my eyes ,I was so confused about this concept about the formula of FCFF thank you so much😀😀

@chrisspeights5606 7 жыл бұрын

You're a life savior!

@nakbarutube 2 жыл бұрын

no words can express my heart-felt gratitude. simply awesome!!!!

@Edspira 2 жыл бұрын

Wow, thank you!

@bhagatsingh5019 8 жыл бұрын

Thank you for your all beautifully explained videos.

@ngl.rsr.1213 3 жыл бұрын

Thank you so much Edspira!💛

@lz2182 7 жыл бұрын

Beautiful, can't image how to pass the course without you 😩

@Edspira 7 жыл бұрын

Happy to help! I'm glad you are doing well :)

@mohamedfaye2017 5 жыл бұрын

Great video. Thanks for the value!!

@anshumanster 4 жыл бұрын

best explanation in youtube

@zenasharba7228 7 жыл бұрын

Thank you very much very helpful 👍🏽

@lauraalejandra8764 7 жыл бұрын

excellent video !! thanks

@kelseysobomehin6416 5 жыл бұрын

Thank you, thank you, thank you!

@mariakarinagonzalesllontop2497 4 жыл бұрын

great explanation. Ive seen other videos in which they include interest in the formula, but I realized it doesnt matter because it does not affect the results

@Edspira 4 жыл бұрын

Yes, there are multiple ways of calculating Free Cash Flow so this can be really confusing. Some companies simply calculate FCF as Operating Cash Flow minus Capital Expenditures in their 10-K filings, while in the field of investment banking it is customary to calculate FCF using a slightly different formula. And there is a distinction between levered FCF and unlevered FCF, which removes the effects of financing. I plan to make some more videos on this

@mariakarinagonzalesllontop2497 4 жыл бұрын

@@Edspira thanks for responding. That`d be great.

@salmahazem5850 2 жыл бұрын

Thank you so much you're the best

@Clifffffffffford 6 жыл бұрын

Thanks!

@presley6004 7 жыл бұрын

Hi there, I am just wondering if there's no capEX been given, does is mean the increase in working capital is zero as well?

@jomsurangphongphanich6606 3 жыл бұрын

Thank you so much

@oae3186 4 жыл бұрын

I swear this felt like rocket science in class😣 Thank you❤️

@venjaminschuster2797 2 жыл бұрын

Sameee!

@freebarry6155 5 жыл бұрын

Say you have a negative change in NWC. Would that be added back into FCF?

@bob6168able 3 жыл бұрын

Excellent

@martijntjeeh 7 жыл бұрын

So why not interest before tax? Because if you do EBIT * 1-tax rate, you get a higher tax rate then you should pay right? Because you pay taxes over your EBT and not over your EBIT?

@primebkpr Жыл бұрын

Thank you

@mjassar8603 5 жыл бұрын

thaaaaaaaaaaaaaaaaaaaaaank u !!!!

@davidsw92 2 жыл бұрын

I always feel like I'm watching an accounting version of FoodWishes when I watch this channel

@Brosef522 7 жыл бұрын

Can you explain why taxes are deducted in order to get to unlevered FCF? Since interest on debt is a pre-tax expense, don't creditors have access to cash flows even before the government?

@mustaphamekhatria 10 жыл бұрын

Nice video :)

@iAliAbdallahYT 8 жыл бұрын

A great video & explanation. But what if the firm gets an operating loan to finance its CAPEX or operating expenses? Are the loan inflow and its repayments included in the calculation of FCF???

@shawn576 8 жыл бұрын

+Ali Abdallah Nope. Issuing bonds and equity are not part of FCF. It's simply cash from operations less capital expenditures. If the capital expenditures exceed the cash from operations, the company has negative FCF. Tesla Motors is a good example of this. The company's net cash increases due to financing activities, but FCF is extremely negative, meaning the business is not at all sustainable. The FCF calculation shows why a stock like Tesla is a very high risk speculation, but a company like Hershey is a very low risk investment. One should also compare the capex to the reported depreciation. If the depreciation is consistently larger than capex over a span of several years, it means the business is slowly liquidating itself, which is very bad.

@brightmind5345 4 жыл бұрын

fine, I can not understand this equation, you subtracted a full charge depreciation expense from a scaled earning before tax and interest which include a component of depreciation which is scaled by the effect of scaling process?. the only interpretation by me. is because of depreciation might be described as a tax shield component. because its effect inside the formula was to mitigate the tax effect then I should be adjusted with its full charge, please correct me if i am wrong, and thanks.

@leonyin83 3 жыл бұрын

you are god-send

@Clifffffffffford 6 жыл бұрын

👍

@zz7733 2 жыл бұрын

This guy sounds exactly like Food Wishes

@jyotibarman1247 3 жыл бұрын

Is negative capex plausible? cause in my calculation my capex happens to be a neagtive number .(so do i have to add the capex in the formula)

@Edspira 3 жыл бұрын

Negative capex is not possible; the lowest capex can be is zero

@Leandrasjones 3 жыл бұрын

minute @ 3:40 could anyone explain the tax bit of (1-t) a little more? So if tax is 40% you want to multiple by 60% (1-40%) why? I wasn't too clear on the reason for this Also overall why is the free cash flow number before any consideration for debt a good number to know? What is the benefit of knowing this? if the debt is in the business and must be paid, isnt the free cash flow really after paying the debt? Please help me understand generally the benefit of free cash flow. Thanks.

@shimonize11 4 жыл бұрын

What would the INCREASE In networking capital be? would it be the difference between this year and the previous year?

@amazingabs 4 жыл бұрын

I have the same question...my guess is yes...

@niteshsonar9458 4 жыл бұрын

Sir, why we are not considering the tax being saved on interest expenses as we will not pay the tax that is saved from interest expenses and the whole amount will be available for the lenders and the equity holders

@Firekid144 5 жыл бұрын

You are Harvard level my friend, very well explained!!

@chanbla11mit 4 жыл бұрын

Thanks Homer

@sovanaphumprak2410 3 жыл бұрын

If the interest have to be there, why not CFC= EBT*(1-t) + Interest +...? We would get a higher value (more cash) as interest tax shield would not be substracted as in the EBIT.

@khushpindersingh686 7 жыл бұрын

The tax rate is applicable on EBT. I suppose this is an example for illustrative purpose.

@satyam7299 5 жыл бұрын

This was my concern too... But he kinda explained a bit of it mid-video.. Pay close attention from 2:50 or so

@mozpassion8996 6 жыл бұрын

What if there is a decrease in NWC?

@EOCmodernRS 5 жыл бұрын

I got an excercise today without any revenue, and without any capex. What do I do?

@fredweasley6182 7 жыл бұрын

You sound like you'd be a country singer.

@Edspira 7 жыл бұрын

lol, I don't think you want to hear me sing!

@rickjacoby4542 7 жыл бұрын

Not sure why you won't just use EBITDA instead of EBIT but videos are great.

@Pain420 4 жыл бұрын

I think depreciation is a non-cash expense so the tax shield does not apply to it. Add back depreciation after multiplying EBIT by (1-t) because depreciation is non-taxable.

@MaartenvanRossemLezingen 7 жыл бұрын

What's the point of knowing a company's free cash flow?

@worldshaper1723 6 жыл бұрын

Maarten van Rossem Lezingen Because Free Cash Flow * 5 = The Value of your company.

@Oetti 6 жыл бұрын

said Kevin O'Leary once or twice, *depending on the type of company*

@burakakyon4319 4 жыл бұрын

Great! It is an excellent and fundamental question. As Warren Buffet suggests that accounting can be very speculative and far away from the truth. For example, companies can show profit in a year by using the magical hands of accounting. The free cash flow is basically showing the cash that left over, after paying and deducting all of its expense. It is very good method to understand whether company is healthy or not.

@NatureandSpirit111 Жыл бұрын

Can you take net income and add the taxes back in?

@ofir-bar-softr 3 жыл бұрын

Why do we care about the change in Net Working Capital? How it comes into play? And regarding Depreciation, why is Amortization being left behind? It usually comes together in such cases isn't it?

@nlcc09 3 жыл бұрын

Changes in working capital signals either decrease or increas in cash for example when trade payable decrease it means u hv paid hence decrease in cash

@nlcc09 3 жыл бұрын

Amortization is also taken into account just like depreciation. Depends with what you are given

@mariohorvat6198 6 жыл бұрын

best fcking explenation hala luya

@Edspira 6 жыл бұрын

Thanks!

@nitinbhalla3391 3 жыл бұрын

Free Cash Flow (Best One)

@ntcuong01ct1 2 жыл бұрын

Dear Friends, In reality with the chain of shop, we can calculate the FCF for each shop and calculate FCF of the chain. How do you think?

@asinicalnarcissist9520 3 жыл бұрын

rip my uni grades

@nitinbhalla3391 3 жыл бұрын

Corporate valuation

@fritzki1 3 жыл бұрын

Hi. I thought net working capital includes cash?

@Miossoty1 5 жыл бұрын

Sigh...

@jamesfeldman4234 5 жыл бұрын

Don't believe this video. Cash flows aren't going to be "free." It takes a lot of work and effort to generate cash flows.

@ritzkola2302 4 жыл бұрын

Shut your dumbass up!

@GetRich101 2 жыл бұрын

I have used 2 FCF Methods One from this video and the other form Jaime's youtube channel From this video's method I got FCF of -19 Million From Edspira's method I got FCF of 6.5 Million LMAO 😂😂😂😂😂😂😂😂😂😂

@mozpassion8996 6 жыл бұрын

What if there is a decrease in NWC?

@Edspira 6 жыл бұрын

You'd simply be subtracting a negative number, or adding the difference. Good question Pk!

@mozpassion8996 6 жыл бұрын

So to calculate the inc NFA I have to do the NFA for both years? Then subtract one to the other? Sorry didnt understand very well. NFA Y2- NFA Y1?