Question

1. What is FCF, how is it calculated, and why is it important to existing and prospective financial stakeholders? What is NOPAT and how is it calculated? What are EBIT and EBITDA and how are they calculated?

Could you please answer question as a short essay 4-6 sentences

Answer 1

Free cash is cash flow which is for creditors and debtors. It is calculated by subtracting increase in net working capital and increase in fixed assets from operating cash flow. It is important because it provides information about cash flow expected for shareholders and lenders.


NOPAT is the net operating income after tax which focuses on income from core operations. NOPAT is operating income multiplied by (1-tax rate) .NOPAT =EBIT*(1-Tax rate)

EBIT is the operating income which is available for interest payment, taxes and dividend Payment. EBitDA includes depreciation too. EBIT =Sales-COGS-Depreciation
EBITDA =Sales -COGS