HI,
Can anyone tell what will be Total debt in Debt payback period. ie. only LT debt or it will include other st debt & Current liablities as well.
I have it as total debt/discretionary CFs
total debt for this includes current liabilities also
Just the LT debt and current portion of LT debt (ST debt).
If this is the ratios that ratings agencies use - debt payback includes all current liabilities
Debt Payback Period = Total Debt / Discretionary Cash flows (Cash flows after FCinn, WCinc, Dividends).
To me, it would not make sense to include in Total Debt all current liabilities, because these are non-cash items. You pay cash debt with the cash, accruals will net themselves.
Regarding the Cash Flows used by S&P, I can’t understand why they ignore Interest Expense in calculating all the cash flows to come up with _Prefinancing Cashflow, c_onsidering that calculations starts from the NI, which means that the interest expense is already deducted.
i tend to agree, but one of the questions at the end of the chapter includes CL