When calculating FCF for DCF analysis, I know that we subtract off the CAPEX (PP&E). I noticed that on the CF statement, there is also a "Purchases of Investment Securities" and "Sales of Investment Securities." Do we also have to factor these into the FCF?
| +134 | Restructuring: Anti-climactic Experience | 36 | 3h |
| +109 | IB Net Worth / Savings Check | 51 | 3h |
| +99 | Woman who emptied Knicks trashcan on street then stole it was DEI exec, worked at JPMorgan Chase | 25 | 1h |
| +81 | Stop sleeping on UBS - it’s pretty good | 28 | 1h |
| +52 | 2026 VAULT PRESTIGE RANKINGS | 30 | 4m |
| +39 | AI + Financial Modelling | 12 | 1d |
| +31 | Hardest interview experiences? | 16 | 1d |
| +28 | Summer before college | 17 | 18h |
| +26 | Current State of UBS in North America | 8 | 2d |
| +23 | Cold apply for FT recruiting? | 5 | 3d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
bump
No
I may be wrong but I believe FCF only deals with operating cash flows and the language of the items you referenced being "investment securities" implies an long term intent so the cash flows would fall under investing and be left out of FCF.
FCF also includes capex and recurring capitalized intangibles such as software.
Capex is obviously included in the equation. By saying "FCF only deals with operating cash flows" I was referencing a specific portion of the SoCF which would exclude the items OP mentioned (as they are financing items). Thank you for the explanation, though.
They are not financing items. Purchase/sale of investment securities do not fall under CFF, they are categorized as CFI, which is why OP is asking if they should be included in a FCF calc as capex (also a CFI item) happens to be. Purchase/sale of investment securities typically relates to how a treasury dept of a company chooses to park its cash. In a DCF, you wouldn't account for this activity as it is non-core to the business itself and should be a part of the residual CF that gets discounted.
Deserunt et a numquam nisi et est. Ut consequatur doloribus cumque earum labore labore. Eaque esse et ipsam aspernatur nostrum et in. Quis accusamus repudiandae aliquid vitae consequatur est.
Aut temporibus minus eos et aut. Neque quam possimus ipsa voluptas deserunt beatae atque.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...