RE: Free Cash Flow Tax Adjustment for Depreciation
Keep in mind the bigger picture. You are using book depreciation because the difference between tax and ook depreciation can be thought of as a working capital change which is in change in working capital in fcff calculation. Although technically deferred tax liabilities (which is difference btwn bo... Keep in mind the bigger picture. You are using book depreciation because the difference between tax and ook depreciation can be thought of as a working capital change which is in change in working capital in fcff calculation. Although technically deferred tax liabilities (which is difference btwn book and tax depreciation) is not part of working capital, you may assume such item is included in working capital. If you want to get specific then why not add deferred compensation adjustments and the countless other items in cfo? Thus, fcff is surely an estimate, meant to capture the biggest items and the smaller items are either immaterial or a wash. If you know a specific item is large, take it on a case by case basis (ie acquistions potentially, etc).

So, don't kill too many brain cells over this one. For better or worse, it is what it is. Note that some ppl, specifically economic analysis do attempt to make such adjustments. Read More

Re: Sale Impact on Equity
When the item is sold, sales (or revenue) would technically increase first, thereby affecting equity (up in this case). Then when the COGS for the item is recorded, equity gets affected again (down). Ditto for SG&A and any other related items. Cash and A/R would be affected based on the terms (payme... When the item is sold, sales (or revenue) would technically increase first, thereby affecting equity (up in this case). Then when the COGS for the item is recorded, equity gets affected again (down). Ditto for SG&A and any other related items. Cash and A/R would be affected based on the terms (payment methods) of the sale itself and thus, doesn’t affect equity directly at the point of sale. Read More

Zero coupon bond vs. non-interest bearing debt
on Liabilities Exercise on pg311. In the video, the instructor refers to effective method to calculate the expense and record the entry. Why don't we go with the non-interest bearing debt analysis? Since it is a zero-coupon bond, shouldn't it be considered a non-interesting bearing bond? The differe... on Liabilities Exercise on pg311. In the video, the instructor refers to effective method to calculate the expense and record the entry. Why don't we go with the non-interest bearing debt analysis? Since it is a zero-coupon bond, shouldn't it be considered a non-interesting bearing bond? The different treatments will yield different interest expenses. That's why I am confused. Looking forward to your reply! Read More

Restricted Stock, etc.
Hi, can you tell me which of these should be added to basic shares outstanding when performing comps (not precedents) analysis: RSAs, PSUs, PSAs, Restricted Stock, SARs exercisable/outstanding, Directors Shares? Thanks so much!

Comps when valuing a company for M&A
Hi, thanks again for answering all of our questions! When spreading comps to perform a comps analysis (not precedents) for the purpose of valuing a company for a take-private, should you still use options exercisable instead of outstanding (even though you would expect all of the options outstanding... Hi, thanks again for answering all of our questions! When spreading comps to perform a comps analysis (not precedents) for the purpose of valuing a company for a take-private, should you still use options exercisable instead of outstanding (even though you would expect all of the options outstanding of the target to vest as a result of change of control)? Read More