Module 5 · FRA

Analyzing Statements of Cash Flows II

EN: Free cash flow, common-size analysis, and CF ratios.
VN: Dòng tiền tự do, phân tích common-size, tỷ số dòng tiền.

1. Free Cash Flow to the Firm (FCFF) Core

About: Cash available to ALL capital providers (debt + equity) after reinvestment. Foundation for enterprise valuation. Add back after-tax interest because we discount to ALL providers.Tóm tắt: Tiền tự do cho TẤT CẢ nhà cung cấp vốn (debt + equity). Dùng định giá DN. Cộng lại lãi sau thuế.

\[ FCFF = NI + NCC + \text{Int}\,(1 - t) - FCInv - WCInv \]

Components

NCC Non-cash charges (D&A, deferred tax, impairment).
Int(1-t) After-tax interest expense.
FCInv Net investment in fixed capital (CapEx − proceeds from disposals).
WCInv Increase in working capital (excl. cash and short-term debt).

From CFO: $FCFF = CFO + \text{Int}(1 - t) - FCInv$

Practice problem

NI $100, NCC $30, after-tax interest $10, FCInv $25, WCInv $5. Compute FCFF.

Show solution

FCFF = 100 + 30 + 10 − 25 − 5

FCFF = $110

2. Free Cash Flow to Equity (FCFE) Core

About: Cash available to EQUITY holders after debt service and net borrowing. Used in equity valuation (FCFE model).Tóm tắt: Tiền tự do cho cổ đông sau lãi vay và borrowing thuần. Dùng định giá cổ phiếu.

\[ FCFE = FCFF - \text{Int}\,(1 - t) + \text{Net borrowing} \]

From CFO: $FCFE = CFO - FCInv + \text{Net borrowing}$

Practice problem

FCFF = $110, after-tax interest = $10, net borrowing = $20. Compute FCFE.

Show solution

FCFE = 110 − 10 + 20

FCFE = $120

3. Cash Flow Ratios Core

About: Test cash quality of earnings (CF/Rev), debt service capacity (CF coverage), reinvestment intensity (CFO/CapEx), and leverage (CFO/Debt).Tóm tắt: Test chất lượng cash của lợi nhuận, khả năng trả lãi, mức tái đầu tư, đòn bẩy.

\[ \text{CF/Rev} = \frac{CFO}{\text{Revenue}} \quad \text{(cash generation per dollar of sales)} \] \[ \text{CF coverage} = \frac{CFO + \text{Int} + \text{Tax}}{\text{Int}} \] \[ \text{Reinvestment} = \frac{CFO}{\text{CapEx}} \] \[ \text{Debt coverage} = \frac{CFO}{\text{Total debt}} \]

Practice problem

CFO = $200, CapEx = $80, Total debt = $400, Revenue = $1,000. Compute CF/Rev, Reinvestment, Debt coverage.

Show solution

CF/Rev = 200/1000 = 20%

Reinvestment = 200/80 = 2.5×

Debt cov = 200/400 = 50%

CF/Rev 20%; Reinvest 2.5×; Debt cov 50%

Practice problem Practice

Practice problem

CFO = $200, after-tax interest = $20, FCInv = $80. Compute FCFF.

Show solution

FCFF = CFO + Int(1−t) − FCInv

= 200 + 20 − 80

FCFF = $140