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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: 49erfan09 who wrote (40121)	11/17/2010 7:13:11 PM
From: Paul Senior	Respond to of 78666

Here's why somebody excludes that item: oldschoolvalue.com

To: 49erfan09 who wrote (40121)	11/17/2010 11:25:07 PM
From: Spekulatius	Respond to of 78666

re FCF formulas - some formulas include working capital changes some don't. The argument can be made either way - if inventory can be regarded as a cash equivalent (low risk) it's probably reasonable to exclude changes in inventory or account receivables. In other cases, it's done for convenience since the inventory numbers fluctuate a lot (seasonal swings etc). In these cases, i would exclude these variation for convenience but I'd check if inventory or receivables scale with revenues YOY. I have seen FCF calculated that include or exclude interest rate payments. I usually include it because it is a real expense that cannot be changed typically. However folks that look at takeover valuations should exclude interest rate payments (but have to include provisions for existing debt) because the debt will be refinanced anyways and interest rate payment will change. So the answer about what is right or wrong depends on what you want to know and what is convenient to calculate.