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Free Cash Flow to Firm Example
 
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An example of valuation using the Free Cash flow to the Firm model.
Views: 53424 Kevin Bracker
Free Cash Flow
 
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This video defines free cash flow, provides an equation for calculating free cash flow, and illustrates the equation with an example. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com To like us on Facebook, visit https://www.facebook.com/Edspira Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Facebook, visit https://facebook.com/Prof.Michael.McLaughlin To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin
Views: 104443 Edspira
Free Cash Flow: How to Interpret It and Use It In a Valuation
 
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You'll learn what "Free Cash Flow" (FCF) means, why it's such an important metric when analyzing and valuing companies. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You'll also learn how to interpret positive vs. negative FCF, and what different numbers over time mean -- using a comparison between Wal-Mart, Amazon, and Salesforce as our example. Table of Contents: 0:54 What Free Cash Flow (FCF) is and Why It's Important 2:26 What Positive FCF Tells You, and What to Do With It 3:56 What Negative FCF Tells You, and What to Do With It 4:38 Why You Exclude Most Investing and Financing Activities in the FCF Calculation 7:55 How to Use and Interpret FCF When Analyzing Companies 11:58 Wal-Mart vs. Amazon vs. Salesforce: Free Cash Flow Across Sectors 19:33 Recap and Summary What is Free Cash Flow? Normally it's defined as Cash Flow from Operations minus Capital Expenditures. Tells you the company's DISCRETIONARY cash flow - after paying for expenses and working capital requirements like inventory and capital expenditures, how much cash flow can it put to use for other purposes? If the company generates a lot of Free Cash Flow, it has many options: hire more employees, spend more on working capital, invest in CapEx, invest in other securities, repay debt, issue dividends or repurchase shares, or even acquire other companies. If FCF is negative, you need to dig in and see if it's a one-time issue or recurring problem, and then figure out why: Are sales declining? Are expenses too high? Is the company spending too much on CapEx? If FCF is consistently negative, the company might have to raise debt or equity eventually, or it might have to restructure itself or cut costs in some other way. Why Do You Exclude Most Investing and Financing Activities Other Than CapEx? Because all other activities are, for the most part, "optional" and non-recurring. A normal company does not NEED to buy stocks or issue dividends or repurchase shares... those are all optional uses of cash. All it NEEDS to do to keep its business running is sell products to customers, pay for expenses, and keep investing in longer-term assets such as buildings and equipment (PP&E). Debt repayment and interest expense are "borderline" because some variations of Free Cash Flow will include them, others will exclude them, and some will include interest expense but not debt principal repayment. How Do You Use Free Cash Flow? It's used in a DCF (or at least, a variation of it) to value a company; it's also used in a leveraged buyout (LBO) model to determine how much debt a company can repay. And you can calculate it on a standalone basis for use when comparing different companies. The key is to DIG IN and see why Free Cash Flow is changing the way it is - Organic sales growth? Artificial cost-cutting? Accounting gimmicks? Different working capital policies? IDEALLY, FCF will be increasing because of higher units sales and/or higher market share, and/or higher margins due to economies of scale. Less Good: FCF is growing due to cost-cutting, CapEx slashing, or FCF is growing in spite of falling sales and profits... because of a company playing games with Working Capital, non-core activities, or CapEx spending. Wal-Mart vs. Amazon vs. Salesforce Comparison Main takeaway here is that Wal-Mart's FCF is all over the place, but Cash Flow from Operations is MOSTLY growing, so that appears to be driven by the also growing organic sales. The company is doing some odd things with CapEx and Working Capital, which led to fluctuations in FCF - not exactly "bad" or "good," just neutral and requires more research. With Amazon, they've increased CapEx spending massively in the past 2 years so that has pushed down CapEx. CFO is growing, driven by organic revenue growth (no "games" with Working Capital), but it's very difficult to assess whether all that CapEx spending will pay off in the long-term. With Salesforce, FCF is definitely growing organically (Revenue growth leads directly to CFO growth, and CapEx varies a bit but not as much as with Amazon), but the company is also spending a ton on acquisitions... will it continue? If CapEx as a % of revenue stays low, it will most likely continue to spend on acquisitions - unlikely to issue dividends, repurchase shares, etc. since it's a growth company. Further Resources http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Free-Cash-Flow.xlsx http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Walmart-Financial-Statements.pdf http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Amazon-Financial-Statements.pdf http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Salesforce-Financial-Statements.pdf
CFA Video Lectures: FCFF and FCFE
 
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We offer the most comprehensive and easy to understand video lectures for CFA and FRM Programs. To know more about our video lecture series, visit us at www.fintreeindia.com This Video lecture was recorded by Mr. Utkarsh Jain, during his live CFA Level II Classes in Pune (India). This video lecture covers following key area's: 1. FCFF Formula 2. FCFE Formula
Views: 27422 FinTree
What is Free Cash Flow to Firm? | FCFF Valuation Basics
 
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In this video, we discuss what is free cash flow to firm or FCFF. Here we develop an intuitive understanding of what is FCFF and how you should do Free Cash Flow to Firm Valuations. ________________________ What is Free Cash Flow? --------------------------------------- To understand Free Cash Flow we start with a FCFF case study wherein Peter starts his business from year 0 with equity capital along with bank loan. For argument sake, we created two scenarios for Peter - 1) When his business is doing badly 2) when his business is doing awesome We also track Excess Cash or Free Cash Flow to Firm = CFO (cash flow from operations) + CFI (cash flow from investments) for each year of the business. We note that in the first case, Peter was dependent on external financing (cash flow from financing) to run his day to day operations. However, in the second case, Peter's own business generated enough CFO such that the business was not dependent on debt capital. The conclusion we draw from this case study above - - If Free Cash Flow i.e. Excess cash (CFO + CFI) is positive and growing, then the company has value - If Free Cash Flow i.e. Excess Cash (CFO + CFI) is negative for an extended period of time, then the return to the shareholder may be very low or zero. Please note that "Excess Cash” is Free Cash Flow to Firm or FCFF. FCFF valuation focuses on the free cash flows generated by the Operating Assets of the business and how it maintains those assets (CFI). For more details, please refer to https://www.wallstreetmojo.com/free-cash-flow-firm-fcff/
Views: 1295 WallStreetMojo
What is Free Cash Flow?
 
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Free cash flow is possibly the most critical number you can look at as a Rule #1 investor, yet it's not a number that's found very easily. In this video, I discuss how you can calculate free cash flow using the company's cash flow statement. http://bit.ly/1Zh9T8h To sign-up for my Transformational Investing Webinar, click the link above. Think you have enough money saved for retirement? Learn more: http://bit.ly/1PTafj1 Don't forget to subscribe to my channel here: http://ow.ly/RNAnK _____________ For more great Rule #1 content and training: Podcast: http://bit.ly/1N3FZ07 Blog: http://bit.ly/1OXZcIn Facebook: https://www.facebook.com/rule1investing Twitter: https://twitter.com/Rule1_Investing Google+: +PhilTownRule1Investing Pinterest: https://www.pinterest.com/rule1investing/
Discounted Cash Flow (Part 2 of 2): DCF Applied to a Real Firm
 
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This video follows Part 1 (available here: http://youtu.be/77ivvN2Uk28), which reviewed the basics of a DCF Model, including how to program a basic model in an Excel spreadsheet. This video illustrates a Discounted Cash Flow Model applied to a real firm. In particular, I discuss the various sources that help inform the inputs, assumptions, and forecasts for the DCF model, including freely available sources on the web, as well as Bloomberg Professional. Disclaimer: This video is for educational purposes only. It is not investment advice. It is not intended to recommend either positively or negatively the company that is used in the illustrative example. The music is "Gnomone a Piacere" by MAT64 (http://www.mat64.org/).
Views: 84870 Jason Greene
Chapter 7 - Calculating Free Cash Flow
 
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Description Not Provided.
Views: 18485 Jaime Lancaster
Session 31: Cash Flows & Growth Rates
 
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Cash flows and growth rates, for valuation
Views: 9844 Aswath Damodaran
CFA Level II: Equity Investments - Free Cash Flow Valuation Part I(of 2)
 
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FinTree website link: http://www.fintreeindia.com FB Page link :http://www.facebook.com/Fin... This series of video covers the following points : -There are two ways to estimate the equity value using free cash flows. -An entire firm and all its cash flows (FCFF) are discounted, with the relevant discount rate being the weighted average cost of capital (WACC) because it reflects all the firm’s sources of capital. The value of the firm’s debt is then subtracted to calculate the equity value. -Only the free cash flows to equity (FCFE) are discounted, with the relevant discount rate being the required return on equity. This provides a more direct way of estimating equity value. -In theory, both approaches should yield the same equity value if the inputs are consistent. However, the FCFF approach would be favored in two cases. The firm’s FCFE is negative. -The firm’s capital structure (mix of debt and equity financing) is unstable. The FCFF approach is favored here because a) the required return on equity used in the FCFE approach will be more volatile when the firm’s financial leverage (use of debt) is unstable and b) when using historical data to estimate free cash flow growth, FCFF growth might reflect the firm’s fundamentals better than FCFE growth, which would fluctuate as debt fluctuates. -FCFF and FCFE approaches to valuation -value of a company by using the stable-growth, two-stage, and three-stage FCFF and FCFE models. -appropriate adjustments to net income, earnings before interest and taxes (EBIT), earnings before interest, taxes, depreciation, and amortization (EBITDA), and cash flow from operations (CFO) to calculate FCFF and FCFE. -approaches for forecasting FCFF and FCFE. -approaches for calculating the terminal value in a multistage valuation model -We love what we do, and we make awesome video lectures for CFA and FRM exams. Our Video Lectures are comprehensive, easy to understand and most importantly, fun to study with! -This Video lecture was recorded by our popular trainer for CFA, Mr. Utkarsh Jain, during one of his live CFA Level II Classes in Pune (India).
Views: 18970 FinTree
ACCA p4 (advanced financial management) free cash flow
 
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for more ACCA P4 Advanced Financial Management Videos please visit: http://www.accaapc.com much appreciate any comment is made after watching this video
Views: 13338 APCsteve
What Working Capital Means in Valuation and Financial Modeling
 
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Why Does Working Capital Matter? Many places define it as Current Assets minus Current Liabilities - that is technically true, but it misses something important. By http://breakingintowallstreet.com/biws/ WHY does it matter? What is the point of this? How do you use it? How does it impact a company's value? It's really the CHANGE in Working Capital that matters for valuation and financial modeling purposes. Working Capital, by itself, does not tell you a terrible amount and could mean many different things... but when you also look at the CHANGE in WC, what it is as a % of revenue and other metrics, AND the company's business model, that's when you start gaining insights. What Does the "Change" in Working Capital Mean? Best NOT to use the official definition of Current Assets minus Current Liabilities... First off, cash and debt should be excluded altogether because they are not operational line items and therefore won't factor in when calculating a company's Free Cash Flow in any type of valuation. Also, it's easier to think of this in terms of the *individual items* that comprise these Current, "Operating" Assets and Liabilities. Most Common Current, Operating Assets: Accounts Receivable, Inventory, and Prepaid Expenses. Commonality: Paid for them upfront in cash or represent cash payments you're waiting on. INCREASING these will cost you cash! Most Common Current, Operating Liabilities: Deferred Revenue, Accounts Payable, and Accrued Liabilities. Commonality: You get cash from these! When they increase, your cash flow goes up because you're getting cash in advance (Deferred Revenue) or because you're delaying payments (AP and AL). So with the "Change" in Working Capital, you're seeing which group of items increases by a greater amount: Current Assets Excluding Cash? or Current Liabilities Excluding Debt? If this Change is NEGATIVE, then Current Assets are increasing by MORE than Current Liabilities! Interpretation: Company might be spending a lot on Inventory, might be waiting too long for customer payments, might be paying suppliers very quickly... If this Change is POSITIVE, then Current Liabilities are increasing by more than Current Assets! Interpretation: Could be collecting a lot of cash upfront, might have no or minimal inventory, or might just be delaying payments to suppliers. Examples and Real World Interpretations: Wal-Mart's Change in Working Capital: It's always negative due to huge Inventory expenditures - since WMT is an offline retailer, it MUST pay for Inventory in advance before selling it. It does keep suppliers waiting a fair amount since its AP balance is also high and increasing each year, but Inventory spending outweighs that. This means that as Wal-Mart's business grows, it requires ADDITIONAL cash to keep growing! But as a % of revenue, this is very small so it makes a minimal impact. It will reduce the company's valuation in a DCF, though, because this will push down Free Cash Flow. Amazon's Change in Working Capital: Amazon's Change in WC, by contrast is positive each year. It's still spending a lot on inventory... and actually, as a % of revenue the change is higher than Wal-Mart's each year... BUT it is also not paying suppliers as quickly and is accruing more to the Accounts Payable balance each year. For WMT, the increase in Inventory exceeds the increase in AP every year... for Amazon it's the opposite! Plus, the Deferred Revenue from customers paying in cash in advance for products boosts Amazon's cash flow. The end result: for Amazon, the Change in Working Capital boosts its Free Cash Flow and therefore its valuation in a DCF - quite significantly since it exceeds Net Income. Salesforce's Change in Working Capital: Salesforce also has a positive Change in Working Capital... No inventory required since it's a subscription software company! BUT it still has AR, and Deferred Commissions - must be paid upfront to sales reps in cash and then recognized over term of subscription. The Net Change still ends up being positive, though, thanks to that huge increase in Deferred Revenue each year... subscriptions are often sold months or years in advance, but the cash is collected UPFRONT. So as Salesforce grows, it doesn't require additional cash - it actually GENERATES additional cash. This will increase its Free Cash Flow and therefore increase its valuation in a DCF. Summary - What Does the Change in Working Capital Mean? As the business grows, does it generate MORE cash than you expect... or it does it REQUIRE additional cash to grow? Makes a big difference for a DCF analysis when you value a company based on its cash flows, but also makes a difference for how much funding the business needs to grow, and even what happens when that business gets acquired. Further Resources http://youtube.breakingintowallstreet.com.s3.amazonaws.com/107-04-WMT-AMZN-CRM-Working-Capital.xlsx
FRM: Free cash flow, FCFF & FCFE
 
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A review of free cash flow to firm (FCFF) and free cash flow to equity (FCFE) based on adjustment of indirect cash flow statement. I use recent RadioShack's (Ticker: RSH) quarterly public (10Q) filing. FCFF is cash available to all capital suppliers; FCFE is cash available to common shareholders. Please note: 1. How working capital impacts CFO cash flows, 2. RadioShack reports FCF, but like all companies, they can define their terms, 3. FCFF adds back interest expense * (1-tax rate) because net income already includes the tax benefit (tax shield) due to the fact that interest is tax deductible. For more financial risk videos, visit our website! http://www.bionicturtle.com
Views: 67729 Bionic Turtle
Free Cash Flow to Firm
 
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This video explains how to compute Free Cash Flow to Firm from financial statements using excel.
Views: 831 InLecture
Free Cash Flow explained
 
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What is Free Cash Flow (FCF) and how do I calculate it? What is Free Cash Flow used for? What is the Free Cash Flow performance of Exxon Mobil (NYSE: XOM), Facebook (NASDAQ: FB), General Electric (NYSE: GE) and General Motors (NYSE: GM)? This Finance Storyteller video provides an in depth look at common and alternative definitions of Free Cash Flow (FCF), compares the profit view and the cash flow view of looking at a company’s performance, and analyzes the Free Cash Flow numbers published by Exxon Mobil, Facebook, General Electric and General Motors. Free Cash Flow is usually defined as: Cash flow not required for operations or reinvestment Cash flow available for distribution among all the securities holders (debt or equity) of an organization Calculation: Cash From Operating Activities (CFOA) minus Capital Expenditures Unfortunately, the Free Cash Flow definitions that companies use are not always the same. Some stay very close to what you see here, but we will also see some alternative definitions along the way in this video. Related videos: Cash Flow Statement explained https://www.youtube.com/watch?v=mZBjsIYrLvM GAAP versus non-GAAP https://www.youtube.com/watch?v=ewzlgnGtfmg&t=74s T-accounting https://www.youtube.com/watch?v=-DjEE6jLe4Y Depreciation https://www.youtube.com/watch?v=6SY8s1_OEro&t=24s Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Free Cash Flow ▌Finance
 
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Understanding Free Cash Flow ::: copyright © INVESTOPEDIA
Views: 20284 Xargo
Business Valuation Free Cash Flow Method
 
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How to determine the value of a business or project using the free cash flow method. For more information visit www.calgarybusinessblog.com
Views: 35625 Matt Kermode
Free Cash Flow ("FCF")
 
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Free cash flow is a very important metric. It is a proxy revealing the cash generation profile of a company. It is considered as "free" as not related to the capital structure of the company. The Free cash flow is calculated as follow: EBIT - taxes (calculated on EBIT) -/+ change in working capital + D&A - capex
Views: 2822 CoachingAssembly.com
Free Cash Flow Example | Calculate FCFF in Excel
 
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In this video, we look at Free Cash Flow example in excel. Here we calculate FCFF of Alibaba IPO and Box IPO and contrast their free cash flows. Free Cash Flow Example 1 - Calculate FCFF of Alibaba IPO - We calculate FCFF using the EBIT formula here - We note that Free cash flow of Alibaba is positive and stable. - Since FCFF is positive in future years, we can use Discounted Cash Flow valuation to value Alibaba Free Cash Flow Example 2 - Calculate FCFF of Box IPO - Here again, we calculate FCFF using EBIT formula - However, FCFF of Box is negative and is in a dismal state. - Also, FCFF is negative not only in the next few years, but when we do projections over a longer period of time, still is comes out to be negative - therefore, we cannot use DCF valuation here. We must apply relative valuation method to value Box. You can download the FCFF Excel template here - https://www.wallstreetmojo.com/free-cash-flow-firm-fcff/
Views: 1447 WallStreetMojo
The Ultimate Cash Flow Guide (EBITDA, CF, FCF, FCFE, FCFF)
 
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This video will cover the major difference between EBITDA, Cash Flow (CF), Free Cash Flow (FCF), Free Cash Flow to Equity (FCFE), and Free Cash Flow to the Firm (FCFF – Unlevered Free Cash Flow). Click here to learn more about this topic: https://corporatefinanceinstitute.com/resources/knowledge/valuation/cash-flow-guide-ebitda-cf-fcf-fcff/
How to Value a Company in 3 Easy Steps - Valuing a Business Valuation Methods Capital Budgeting
 
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Clicked here http://www.MBAbullshit.com/ and OMG wow! I'm SHOCKED how easy.. Just for instance I possessed a company comprising of a neighborhood store. To put together that center, I invested $1,000 one year ago on apparatus along with other assets. The equipment in addition to other assets have depreciated by 10% in a single year, so now they're valued at only $900 inside the accounting books. In case I was going to make an effort to offer you this company, what amount would an accountant value it? Relatively easy! $900. The cost of the whole set of assets (less liabilities, if any) can give accountants the "book value" of a typical organization, and such is systematically how accountants observe the worth of an enterprise or company. (We employ the use of the word "book" because the worth of the assets are penned within the company's accounting "books.") http://www.youtube.com/watch?v=6pCXd4i7DM0 However, imagine this unique company is earning a juicy cash income of $2,000 annually. You would be landing a mighty incredible deal in the event I sold it to you for just $900, right? I, on the flip side, might be taking out a pretty sour pact in the event I offered it to you for just $900, on the grounds that as a result I will take $900 but I will shed $2,000 per annum! Due to this, business directors (dissimilar to accountants), don't make use of merely a company's book value when assessing the value of an organization.So how do they see how much it really is worth? To replace utilizing a business' books or even net worth (the market price of the firm's assets minus the business enterprise's liabilities), financial managers opt to source enterprise worth on how much money it gets in relation to cash flow (real cash acquired... contrary to only "net income" that may not generally be in the format of cash). Basically, a company making $1,000 "free cash flow" monthly having assets worth a very small $1 would remain to be worth a great deal more versus a larger company with substantial assets of $500 in the event the humongous company is attaining only $1 yearly.So far, how do we achieve the exact value of your business? The simplest way would be to mainly look for the net present value of the total amount of long run "free cash flows" (cash inflow less cash outflow).Needless to say, you will come across much more sophisticated formulas to find the value of a company (which you wouldn't genuinely need to learn in detail, since there are numerous gratis calculators on the web), but practically all of such formulas are in a way driven by net present value of cash flows, plus they are likely to take into consideration a few factors for example growth level, intrinsic risk of the company, plus others.
Views: 293120 MBAbullshitDotCom
Session 7: Estimating Cash Flows
 
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Goes through the steps in estimating cash flows, from measuring earnings to computing reinvestment and then on to cash flows (to both the firm and to equity).
Views: 74735 Aswath Damodaran
DCF Valuation Model- FCFF and FCFE by Ibinstitute
 
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DCF Valuation Model- FCFF and FCFE by Ibinstitute
Views: 6318 IB Institute
Free Cash Flow Calculation and Valuation
 
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This is an example of a free cash flow calculation
Views: 28877 Shane Van Dalsem
Free Cash Flow to Equity Intro and Example
 
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An introduction to valuation using the Free Cash Flow to Equity model. An explanation of FCFE and an example.
Views: 41898 Kevin Bracker
TUTORIAL FREE CASH FLOW TO THE FIRM (FCFF)
 
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Paso a paso, como realizar el flujo de caja libre para la firma, con formulas en Excel. FUENTE: Proyectos para emprendedores Florencia Roca
Free Cash Flow to Firm (FCFF)
 
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This video explains the free cash flow to firm. This video was made for people who are new to finance or are trying to brush up on some basic finance concepts. This video gives one of the calculations for the free cash flow to firm. It also advises some things to watch out for when doing your calculation. I sell valuation reports on Amazon. Please read the description before purchasing. Links to the reports below: DCF Valuation for P&G - http://a.co/d/0kB72nC DCF Valuation for ADP - http://a.co/d/aHDEL6M DCF Valuation for MSFT - http://a.co/d/4jyEvPW
Business Valuation Cash Flows - FCFF , FCFE , FCFD
 
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@ Members ::This video would let you know about Business Valuation and three Techniques of Business Valuation - Free Cash Flow to Firm (FCFF) , Free Cash Flow to Equity (FCFE) , Free Cash Flow to Debt. You are most welcome to connect with us at 91-9899242978 (Handheld) , Skype ~ Rahul5327 , Twitter @ Rahulmagan8 , Rahul.magan@treasuryconsulting.in , Info@treasuryconsulting.in or visit our website - www.treasuryconsulting.in
Free Cash Flow to Firm
 
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Views: 1832 rnrfinance
Free Cash Flow Valuation Tutorial
 
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This is a tutorial of a free cash flow to the firm valuation
Views: 6602 Shane Van Dalsem
Discounted Cash Flow Model
 
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This video explains how to use the Discounted Cash Flow Model to value a firm. Whereas the Dividend Discount Model values the firm based on future dividends and the Total Payout Model values the firm based on dividends and share repurchases, the Discounted Cash Flow Model values a firm without having to consider dividends, repurchases, or the firm's use of debt. This video provides a comprehensive example to illustrate how the DCF model is used to come up with a valuation. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com To like us on Facebook, visit https://www.facebook.com/Edspira Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Facebook, visit https://facebook.com/Prof.Michael.McLaughlin To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin
Views: 20194 Edspira
Free Cash Flow vs. Unlevered Free Cash Flow vs. Levered Free Cash Flow
 
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You'll learn about metrics and multiples based on cash flow in this lesson, and you'll understand how each of them is subtly different from the others. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You will also learn the problems and draw-backs with these metrics, and why they are not used as frequently to value companies. Table of Contents: 1:28 The Problems with Cash Flow-Based Metrics 4:10 FCF vs. Levered FCF vs. Unlevered FCF -- Key Differences 8:23 Example FCF Calculations for Steel Dynamics 11:07 Practice Exercise -- Cash Flow Metrics for LinkedIn 15:14 Which Metric Do You Use, and Why? 17:04 Recap and Summary Why Should You Care About Cash Flow-Based Metrics? Could come up in interviews - VERY common to get asked how you define Unlevered Free Cash Flow, Levered Free Cash Flow, Free Cash Flow... And you need to know these metrics when valuing companies, especially in the Discounted Cash Flow (DCF) analysis - not AS useful for comparing different companies as metrics such as EBITDA and EBIT are. Problems with Cash Flow-Based Metrics for Comparison Purposes: 1. They take longer to calculate - more complicated than just Operating Income + D&A, for example - you need the whole CFS! Plus: information on a company's tax rate, mandatory debt repayments, etc. etc. 2. They're more discretionary and vary more by individual company - in this case, for example, different Working Capital requirements create massive differences in cash flow between Steel Dynamics and LinkedIn. Other issues: Different non-cash adjustments, different CapEx policies (3% of revenue vs. 18% of revenue here!), different ways of preparing the Cash Flow Statement! (Direct vs. indirect vs. starting with EBIT). Bottom-Line: Cash Flow metrics have their uses, but they are more about approximating a company's cash flow, for use in other analyses such as the DCF, and they are LESS useful for comparing different companies. FCF vs. Levered FCF vs. Unlevered FCF -- Key Differences Basic idea is similar with all 3 metrics: "How much discretionary cash flow does this company generate?" Remember: Items in the Financing section and most items in the Investing section of the Cash Flow Statement are "optional" -- the only one that's really required is CapEx, which represents re-investment in the business. So UNLIKE metrics such as EBITDA, these cash flow metrics all directly reflect the impact of CapEx, taxes, and working capital. The Difference: They all treat interest expense and debt repayment differently. Free Cash Flow: Includes interest expense, but NOT debt issuances or repayments. Unlevered Free Cash Flow: Excludes interest expense and ALL debt issuances and repayments. Levered Free Cash Flow: Includes interest expense, and mandatory debt repayments (but opinions on this differ!). Free Cash Flow: Cash Flow from Operations - CapEx. Unlevered Free Cash Flow: NOPAT + Non-Cash Adjustments and Changes in Working Capital from CFS - CapEx Levered Free Cash Flow: Net Income + Non-Cash Adjustments and Changes in Working Capital from CFS - CapEx - (Mandatory?) Debt Repayments BUT... IFRS and the Direct Method of Cash Flow Statement preparation make these calculations trickier. Problems: Companies may not always include Taxes and the Interest Expense within the Cash Flow from Operations section -- or they might start with EBIT and show these items separately, or scattered across the Cash Flow Statement. So you need to be REALLY careful about how you run the numbers - we always recommend converting the CFS to the Indirect version, if possible. Which Metric Do You Use, and Why? Again, it's a question with a false premise (as we saw with EBIT vs. EBITDA vs. Net Income). The issue here is that you could use any of these to create valuation multiples... even Cash Flow from Operations would be OK! But you rarely do that because of all the issues discussed above - they take too long to calculate, they're harder to project, and they vary a lot by company and industry. Better Question: WHEN do you use each metric, in most cases, and why? Free Cash Flow: Standalone financial statement analysis (e.g., what is a company doing with its discretionary cash flow?). Unlevered FCF: Very common in discounted cash flow (DCF) analysis. Levered FCF: Quite rare; can use it in a DCF in some industries, and may also be used to assess a company's true debt service capabilities. MENTIONED RESOURCES http://youtube-breakingintowallstreet-com.s3.amazonaws.com/106-08-Cash-Flow-Metrics.xlsx http://youtube-breakingintowallstreet-com.s3.amazonaws.com/106-08-LNKD-Financial-Statements.pdf http://youtube-breakingintowallstreet-com.s3.amazonaws.com/106-08-STLD-Financial-Statements.pdf
Discounted Cash Flow (Part 1 of 2): Valuation
 
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In this vide, I discuss the Discounted Cash Flow, or DCF, Model as an approach to estimating the intrinsic value of a company's stock. I review the theoretical motivation behind the model and discuss the model's required inputs, assumptions, and forecasts. I walk through building a basic implementation of the DCF model in Microsoft Excel. Part 2 of the video (http://youtu.be/ijpPg8eAhv4) shows the application of the basic Excel DCF model to a real firm, including illustrations of where to find data to support the inputs, assumptions, and forecasts. The music is "Gnomone a Piacere" by MAT64 (http://www.mat64.org/).
Views: 160169 Jason Greene
Business Valuation - Free Cash Flow to Firm (FCFF)
 
09:10
@ Members :: This video would let you know about Business Valuation technique which is known as " Free Cash Flow to Firm" and and types of Non Cash working Capital ( excl derivatives ) You are most welcome to connect with us at 91-9899242978 (Handheld) , Rahul.magan@treasuryconsulting.in , Info@treasuryconsulting.in , Skype ~ Rahul5327 , Twitter @ Rahulmagan8 or visit our website - www.treasuryconsulting.in
Free Cash Flow to Equity Application
 
18:11
A demonstration of applying the FCFE model to valuing Apple. Note that this is a quick demonstration and not a detailed forecasting model.
Views: 11105 Kevin Bracker
Level I CFA® Tutorial: Corporate Finance - Free Cash Flow to Firm & Free Cash Flow to Equity
 
03:04
Get free 10 days Corporate Finance tutorials: http://www.edupristine.com/ca/free-10-day-course/cfa-corporate-finance/ http://www.edupristine.com - KickStart your CFA® prep with EduPristine. Get free consultation from our experts, drop a mail at: query@edupristine.com CFA® is considered as the global passport to the world of finance. The CFA® Program bridges industry practice, investment theory, and ethical and professional standards to provide investment analysis and portfolio management skills. Subscribe for more updates: http://www.youtube.com/user/edupristine?sub_confirmation=1 For more videos log onto http://www.youtube.com/edupristine Find us on Facebook at https://www.facebook.com/edupristine Find us on google plus https://plus.google.com/112352201586522582395/posts Follow us on Twitter: https://twitter.com/edupristine Learn how to calculate FCFF: Free Cash Flow to Firm & FCFE: Free Cash Flow to Equity About EduPristine: Trusted by Fortune 500 Companies and 10,000 Students from 40+ countries across the globe, EduPristine is one of the leading Training provider for Finance Certifications like CFA®, PRM, FRM, Financial Modeling etc. EduPristine strives to be the trainer of choice for anybody looking for Finance Training Program across the world.
Views: 3575 EduPristine
Forecast, Valuation, and Cash Flows
 
36:43
In this video, I demonstrate how to create a financial statement forecast, value a firm from that forecast, and create a statement of cash flows from the forecast
Views: 11050 Shane Van Dalsem
Free Cash Flow to Equity (FCFE)
 
03:48
This video explains the free cash flow to equity. This video was made for people who are new to finance or are trying to brush up on some basic finance concepts. This video gives two of the calculations for the free cash flow to equity. It also advises some things to watch out for when doing your calculation. I sell valuation reports on Amazon. Please read the description before purchasing. Links to the reports below: DCF Valuation for P&G - http://a.co/d/0kB72nC DCF Valuation for ADP - http://a.co/d/aHDEL6M DCF Valuation for MSFT - http://a.co/d/4jyEvPW
Projecting Net Working Capital For Free Cash Flow Calculation, DCF Model Insights
 
24:05
How do you project changes in net working capital (NWC) when building your DCF and calculating free cash flow? In this video I cover the different ratios that can be used to project NWC rather than using the simple percentage of sales method. Instead, for the most accurate results, the analyst should project the individual components of non-cash current assets and non-interest bearing current liabilities to better project FCF. In this video we cover; - Days sales outstanding (DSO) - Days inventory held (DIH) - Inventory Turns - Days payable outstanding (DPO) If you have any other questions, please comment below. If you enjoyed the video and found it helpful, please like and subscribe to FinanceKid for more videos soon! For those who may be interested in finance and investing, I suggest you check out my Seeking Alpha profile where I write about the market and different investment opportunities. I conduct a full analysis on companies and countries while also commenting on relevant news stories. http://seekingalpha.com/author/robert-bezede/articles#regular_articles
Views: 1817 FinanceKid
Free Cash Flow
 
04:04
FCF stands for Free Cash Flow, and this video will thoroughly explain what free cash flow is. We will soon make a follow-up video that teaches how to assess a company's free cash flow so one can put this concept to use. This video will cover the following: - formula for FCF which is Net Cash From Operating Activities - Capital Expenditures - A thorough explanation of net cash from operating activities term - A thorough explanation of the capital expenditures term - an example of capital expenditures of WalMart expanding into Asia and Africa - The advantages of using free cash flow and how it can't be manipulated - a quote from Kevin O'Leary on why he likes Free Cash Flow - Coca Cola free cash flow when Warren Buffett purchased stock in 1988 - why Buffett thought Coca Cola was a good buy - Why Buffett likes to call free cash flow Owner Earnings Make sure to share this video on Facebook and Twitter!! It really helps us out a lot! Ending beat by Lynval D'tchalis, check him out here: https://soundcloud.com/lynval-sundayswag-dtchalis If you want to know more about us or the progress of our videos make sure to follow us @MrSoniBros
Views: 30160 Soni Bros
What is Free Cash Flow?
 
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The Motley Fool's Andrew Tonner answers the question: "What is free cash flow?"
Views: 2590 The Motley Fool
Forecasting Free Cash Flows
 
01:22
Free cash flow (FCF) measures a company’s financial performance. It shows the cash that a company can produce after deducting the purchase of assets such as property, equipment, and other major investments from it’s operating cash flow. Click here to learn more about this topic: https://corporatefinanceinstitute.com/resources/knowledge/valuation/what-is-free-cash-flow-fcf/ Further information on Free Cash Flow: https://corporatefinanceinstitute.com/resources/knowledge/valuation/fcf-formula-free-cash-flow/
Tim Bennett Explains: What is free cash flow yield?
 
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Free cash flow yield is widely quoted by analysts and gives investors a useful insight into whether a share is cheap or expensive. In this week’s short video I explain how it works.
Views: 3261 Killik & Co
How to value a company using discounted cash flow (DCF) - MoneyWeek Investment Tutorials
 
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Every investor should have a basic grasp of the discounted cash flow (DCF) technique. Here, Tim Bennett introduces the concept, and explains how it can be applied to valuing a company.
Views: 439197 MoneyWeek
Free Cash Flow vs Operating Cash Flow
 
04:01
TheMarketCapitalist.com presents why looking beyond free cash flow (FCF) to operating cash flow (OCF) matters when evaluating an investment.
Views: 6230 Dominico Johnston
Value of Firm using Free Cash Flows Case Study
 
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"Install our android app CARAJACLASSES to view lectures direct in your mobile - https://bit.ly/2S1oPM6 " Join my Whatsapp Broadcast / Group to receive daily lectures on similar topics through this Whatsapp direct link https://wa.me/917736022001 by simply messaging YOUTUBE LECTURES Did you liked this video lecture? Then please check out the complete course related to this lecture, ADVANCED FINANCIAL MANAGEMENT with 190+ Lectures, 24+ hours content available at discounted price (10% off)with life time validity and certificate of completion. Enrollment Link For Students Outside India: https://bit.ly/2N7P5BX Enrollment Link For Students From India: https://www.instamojo.com/caraja/advanced-financial-management-a-complete-stu/?discount=inyafmacs3 Our website link : https://www.carajaclasses.com Welcome to this course on Advanced Financial Management - A Comprehensive Study. In this course you will be expose to the advanced concepts of Financial Management covering a) Mergers and Acquisitions. b) Capital Market Instruments c) Advanced Capital Budgeting Techniques. d) Risk Analysis in Capital Budgeting e) Sensitivity and Scenario Analysis in Capital Budgeting f) Leasing g) Basics of Derivatives. h) Portfolio Management - Quantitative Techniques. i) Dividend Decisions. The above topics were also available as separate courses. By taking this course, you need not take the separate courses taught by me in the above names. This course is structured keeping Professional course students in mind like CA / CPA / CFA / CMA / MBA Finance, etc. This course will equip you for approaching those professional examinations. This course is presented in simple language with examples. This course has video lectures (with writings on Black / Green Board / Note book, etc). You would feel you are attending a real class. This course is structured in self paced learning style. You would require good internet connection for interruption free learning process. You have to go through the videos leisurely to grab the concepts with clarity. Take this course to gain strong hold on Advanced Concepts in Financial Management. • Category: Business What's in the Course? 1. Over 143 lectures and 16.5 hours of content! 2. Understand Mergers and Acquistions. 3. Understand Advanced Capital Budgeting Techniques 4. Understand Risk Analysis in Capital Budgeting 5. Understand Sensitivity and Scenario Analysis in Capital Budgeting 6. Understand Leasing 7. Understand Dividend Decisions 8. Understand Basics of Derivative Instruments 9. Understand Portfolio Management - Quanitative Techniques Course Requirements: 1. Basic knowledge in Financial Management 2. Basic Knowledge in Accounting Who Should Attend? 1. Professional Course students taking up courses like CA / CPA / CMA / CFA / CIMA / MBA Finance 2. Finance Professionals
Views: 217 CARAJACLASSES
Dividend Discount Model, Gordon Growth, FCFF, FCFE
 
09:02
For details, visit: http://www.financewalk.com Dividend Discount Model, Gordon Growth Model, FCFF, FCFE Income Based Valuation Approaches There are 3 methods under Income based valuation 1. Dividend Discount Model (DDM) 2. Free Cash Flow to Firm (FCFF) 3. Free Cash Flow to Equity (FCFE) Gordon Growth Model A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. Given a dividend per share that is payable in one year, and the assumption that the dividend grows at a constant rate in perpetuity, the model solves for the present value of the infinite series of future dividends . • Formula = Stock Value(P)=D - K-G Where: D = Expected dividend per share one year from now k = Required rate of return for equity investor G = Growth rate in dividends (in perpetuity) Since the model assumes a constant growth rate, it is generally only used for mature companies (or broad market indices) with low to moderate growth rates Example -- ABC Ltd. Gave Rs. 25 dividend for year 20011-12 and is expected to grow it by 20% next year. Cost of Equity is 14% and expected growth in dividend is 10 % forever. DDM =30 - 0.14 - 0.10 = Rs.750 What is FCFF "A measure of financial performance that expresses the net amount of cash that is generated for the firm, consisting of expenses, taxes and changes in net working capital and investments." Formula : FCFF = Operating Cash Flow -- Expenses -- Taxes -- Changes in NWC -- Changes in Investments Steps in FCFF Valuation 1. Take the sales figure 2. Deduct Operating expenses from it. You will get EBIT figure 3. Multiply EBIT with (1-Tax rate) 4. Deduct (Capital Expenditures -- Depreciation) figure from it. 5. Deduct "Change in working capital" figure from it. 6. You will get FCFF figure 7. Calculate Cost of Capital for the firm. 8. Assume "Expected growth rate" for the company .(It should not be significantly higher than the nominal growth rate of the economy. Value of the firm = FCFF x (1+Expected Growth Rate) - (Cost of Capital - Expected Growth Rate) FCFF x (1+g) - Ke - g What is FCFE "This is a measure of how much cash can be paid to the equity shareholders of the company after all expenses, reinvestment and debt repayment." Formula -- FCFE = Net Income -- Net Capital Expenditure -- Change in Net working capital+ New Debt -- Debt Repayment In short , FCFE = FCFF -- Debt Payments + New Debt issued
Views: 11155 Avadhut Nigudkar

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