Why Non-Cash Current Assets and Non-Debt Current LIabilities for change in working capital? Change in working capital formula is ( Current Assets in year ‘T’ - Current Liabilities in year ‘T’) - (Current Assets in year ‘T-1’ - Current Liabilities in year ‘T-1). Is it not ?
Yes, if it’s taken care then there’s no need. It’s just that ‘Working Capital’ needs to get defined properly. Accounting entries are fickle. According to me, Current Assets without Cash and Current Liabilities without Debt constitute Working Capital.
FCFF includes payments to Debtors. So most definitely it excludes Debt (So, including Short Term Debt, which usually gets grouped under Current Liabilities). We can agrue about whether Cash is Working Capital. I’d say any Cash that earns more than the Risk-free Rate is risk less and should not form part of Working Capital.
In short, FCFF would be
(-) Taxes Paid
(-) (Non-cash Current Assets in year ‘T’ - Non-debt Current Liabilities in year ‘T’) - (Non-cash Current Assets in year ‘T-1’ - Non-debt Current Liabilities in year ‘T-1’)
(-) (Net Fixed Assets in year ‘T’) - (Net Fixed Assets in year ‘T-1’)
(+) Depreciation in year ‘T’
It’s also about how you define the income earned from liquid assets. I normally ignore this income (Usually termed as ‘Other Income’ in Accounting). That is, my EBIT would not include ‘Other Income’. So, I will not consider cash as Working Capital.
If you consider Other Income as a part of EBIT, you may want to use cash as Working Capital.
@Sidhegde Wonderful work. Im glad that I came across this now. I would recommend it to all my friends who are market participant. Is it possible to put the financials and other things as a downloadable csv ?. That would make this wonderful service to a next level. I really like it.
@Sidhegde Sir i have one query about Aditya birla capital’s quarterly result data. Tijori website shows yoy march qtr consolidated revenue and pat different from their exchange filing of quarterly result.
This seems to be an issue on the quarterly results for a few companies as pointed out by you. We are in touch with the exchange and they are looking into this issue. Will keep you updated. Thanks again!