![]() share buybacks), or kept as retained earnings to be reinvested into sustaining current and future growth.Ĭalculating the FCFE begins with net income, which is adjusted for non-cash items and changes in working capital, resulting in cash flow from operating activities (CFO).įrom CFO, capital expenditures (capex) – the primary line item in the cash flow from investing activities (CFI) section – is subtracted because it is a recurring, core expenditure of the company.įinally, the cash inflows from new debt borrowings are added, net of any cash outflows related to the repayment of debt. Moreover, FCFE is indicative of the cash flows that can be distributed to shareholders as dividends, used to repurchase shares (i.e.
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