Appendix C
List of Equations
Chapter 2: Analysis and Evaluation of Data
assets = liabilities + shareholders’ equity
outstanding shares = issued shares – Treasury shares
working capital = current assets – current liabilities
net debt = short-term debt + long-term debt – cash and cash equivalents
CCC = days inventory outstanding + days sales outstanding – days payable outstanding
CCC = days inventory outstanding + days sales outstanding – days payable outstanding
FCFF = EBIT (earnings before interest and taxes) x (1 – tax rate) + noncash charges (such as depreciation and amortization) – capital expenditures – increases in working capital*
* Add any decreases in working capital
FCFF = net income + noncash charges (such as depreciation and amortization) + interest x (1 – tax rate) – capital expenditures – increases in working capital *
* Add any decreases in working capital
free cash flow to the firm = cash flow from operations + interest payments x (1 – tax rate) – capital expenditures
FCFE = net income + noncash charges (such as depreciation and amortization) – capital expenditures – changes in working capital* + increases in net borrowing**
* Add any decreases in working capital
** Subtract any decreases in net borrowing
FCFE = FCFF – interest expense x (1 – tax rate) + increases in net borrowing*
* Subtract any decreases in net borrowing
FCFE = cash flow from operations – capital expenditures + increases in net borrowing*
* Subtract any decreases in net borrowing
EBITDA = operating income + depreciation + amortization
or
EBITDA = net income + interest + taxes + depreciation + amortization
or
EBITDA = revenues – expenses + interest + taxes + d