Do we add the loss and subtract the gain in the non-cash charge component cause I think FCInv is already = capital exp - proceeds of sale of asset
Yes, subtract a gain on sale of assets from CFO as it’s not part of operating activity.
FCInv = capex - proceeds from sale (not gain on sale). Proceeds from sale of assets basically reduce your capex expenditures.
Together it would be:
FCFE = CFO - gain on sale of assets + NB - FCInv + proceeds from sale
I just found one explanation from CFAI Mock and they did not deduct proceeds from sale of asset.
For eg. if our Net PPE increased by 1000 on BS and we sold 150 of PEE, we have CFI of -850. But in calculation of FCFE they used entire 1000 not 850.
Can anyone plase explain this as I’m starting losing my patience by encountering every time different definitions…
Why are we using Net PPE in this case? Isn’t Net PPE factoring Depreciation which if i can recall properly, isn’t a cash item?
Also, can you compare what the difference will be if you had calculated Investment in Fixed Capital using changes in Investment Cashflow rather than directly from the balance sheet?