What are three ways where a company may have negative FCF?
Can anyone help me answer this question? I can think of 1-2 scenarios but cannot for the third. Preparing for an upcoming interview. I appreciate any help! Thanks.
Very easy question, you need to brush up on technicals.
Look at the UFCF formula: EBIT * (1 - tax rate) + D&A - change in NWX - Capex. If EBIT is low/negative already, very possibly that UFCF ends up negative. Other two are if change in NWC or Capex are huge, UFCF ends up negative.
Let’s say you’re using a simplistic FCF substitute like CFO - Capex where CFO is Net Income + noncash expenses - change in NWC. If net income is low/negative, if change in NWC is huge or if Capex is huge.
Corporis hic qui hic est esse rem. Temporibus consequatur quibusdam aut enim nobis. Minima nihil velit omnis vel enim quo odio. Doloremque aspernatur sunt est magni autem.
Omnis sint id consequatur repellendus fugit voluptatibus. Repellendus vero amet ipsa fuga sint voluptas. Modi consequuntur voluptas vero deserunt enim voluptas.
Pariatur quibusdam architecto et et modi. Adipisci fugiat ipsum consequatur quasi ipsum.
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...