I am very new to investing. I don’t know how to calculate Free Cash Flow. As per books,
Free Cash Flow = EBIT(1 - tax rate) + Depreciation - CapEx - Change in Working Capital.
Now I have taken an example of Bharat Electronic for 2008-2009 so that I can compare my results with Free Cash Flow number here on ValuePickr. One can find Annual report for Bharat Electronics here athttp://www.bel-india.com/images/itm-pdfs/AR_2008-09.pdf
Let me explain my calculations
**Profit Before Tax **(page 56)
-** 10,968,359 **Rs(Thousands)
Interest(page 56)** )- 107,685**Rs(Thousands)
EBIT = PBT +Interest =10,968,359 +107,685
Tax Rate = 33.99% fromhttp://en.wikipedia.org/wiki/Income_tax_in_India#Corporate_Income_tax
**1) EBIT (1 - Tax Rate) **=11076044 ( 1 - 0.3399)
2) Depreciation(page 56))- 1,055,977Rs(Thousands)
3) CapEx(page 77) = Purchase of Fixed Assets(Section B. Cash From Investing Activities)
**Working Capital:**The excess of current assets over current liabilities is referred to as the companyas working capital.
**Change in Working Capital:**The difference between the working capital for two given reporting periods is called the change in working capital.
Working Capital for Year 07- 08 = Net Current Asset (page 55) = 26,309,001Rs(Thousands)
Working Capital for Year 08- 09 = Net Current Asset (page 55) = 31,355,563Rs(Thousands)
4) Change in WC = (Working Capital for Year 08- 09) minus (Working Capital for Year 07- 08)
** = 5,046,562**Rs(Thousands)
So from 1, 2, 3 and 4
FCF = **7,311,296.644+1,055,977-****1,707,835 -**5,046,562
** = 1,612,876.644**Rs(Thousands) = 161.28 (Rs. Cr.)
The above numbers are waydifferentfrom the FCF value given by ValuePickr.
FCF from Value Pickr is228.73(Rs. Cr.)
Thanks and Regards,