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Working capital is a financial metric that measures the liquidity of a business or entity. It is calculated as current assets minus current liabilities and can be managed by optimizing the working capital cycle and the cash conversion cycle.
Magic formula investing is a value investing technique by Joel Greenblatt that uses earnings yield and return on capital to select stocks. The formula has been tested and validated in various markets around the world, but may have some drawbacks and limitations.
In financial accounting, free cash flow (FCF) or free cash flow to firm (FCFF) is the amount by which a business's operating cash flow exceeds its working capital needs and expenditures on fixed assets (known as capital expenditures). [1]
Easy: Working capital is derived from the balance sheet and equals the sum of current assets such as cash and inventory after subtracting current liabilities such as accounts payable and short ...
Free cash flow to firm (FCFF) is the cash flow available to all the firm's providers of capital once the firm pays all operating expenses (including taxes) and expenditures needed to support the firm's productive capacity. The providers of capital include common stockholders, bondholders, preferred stockholders, and other claimholders.
Net present value (NPV) is a way of measuring the value of an asset that has cashflow by adding up the present value of all the future cash flows. NPV takes into account the time value of money and the discount rate to evaluate and compare capital projects or financial products.
Depreciation*(tax rate) which locates at the end of the formula is called depreciation shield through which we can see that there is a negative relation between depreciation and cash flow. Changing in net working capital: it is the cost or revenue related to the company's short-term asset like inventory.
Where is sum of the net capital expenditure and the change in net working capital. If we substitute the (3) and (4) equation into the (2), then we get these formulas (5), if we suppose that the covariances between the market and the components of equity cash flow are zero (hence β ∆IC =β Debt new =β Interest =0 ), except the covariance ...
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