Adjusting for plant when calculating CFO using Indirect Method

CFA Level I Fixed Income
#1

Hey everyone,

I understand that to calculate CFO using Indirect Method, we go from Net income, adjust for non cash charges (Dep/Amort…) and non-operating activities.
I don’t get why we adjut for changes in Inventories, Account payables, receivables, taxes payables, all that. But not for Plant? Why we don’t adjust with the change in Plant from a year to another?

Thanks guys.

#2

Those items you listed are working capital items. PP&E are fixed assets (permanent capital) that are covered in the investing activities section of the cash flow statement.

2 Likes
#3

thanks chadsandstedt!