Valuation question - Why are they adding taxes back to OCF??
I was going through the model of a gaming company prepared by the equity analyst of a top bank. In their Free Cash Flow formula, I noticed that they added back taxes after having substracted it in Operating Cash Flow (OCF).
Perhaps easier sharing their formula: FCF = Operating Cash Flow - Capex + Add-back of taxes.
Perhaps a dumb question, but I can't figure out why you would add back a cash outflow like taxes. Any help?
Thanks a lot
It all depends about how cash flows are defined, but generally taxes can be added back in this case for comparability to other companies which have different capital structures, and therefore different taxes.
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