Hi All,

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

= **11076044**Rs(Thousands)

Tax Rate = 33.99% fromhttp://en.wikipedia.org/wiki/Income_tax_in_India#Corporate_Income_tax

So,

**1) EBIT (1 - Tax Rate) **=11076044 ( 1 - 0.3399)

=**7311296.644**Rs(Thousands)

**

**

**2) Depreciation**(page 56)**)- 1,055,977**Rs(Thousands)

**3) CapEx**(page 77) = **Purchase of Fixed Assets**(Section B. Cash From Investing Activities)

= **1,707,835**Rs(Thousands)

**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)

=31,355,563**-**26,309,001

** = 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 is**228.73**(Rs. Cr.)

Please help

Thanks and Regards,

Yogendra