DCF Question (basic)
when building a DCF and calculating unlevered fcf are you supposed to add back every non cash and non recurring expenses? or are you only expected to add back d&a and subtract capex and the change in nwc
when building a DCF and calculating unlevered fcf are you supposed to add back every non cash and non recurring expenses? or are you only expected to add back d&a and subtract capex and the change in nwc
+250 | My chaotic IB journey | 27 | 12h | |
+211 | MS M&A vs GS HC | 49 | 1s | |
+177 | Ending My Life if I don't get an SA 2025 Offer | 63 | 1d | |
+115 | Anyone live in a different country before? What’s it like? | 43 | 23h | |
+74 | Hazing in the Bullpen. What to do? | 15 | 13h | |
+57 | Improving in TMT | 24 | 51m | |
+53 | MD shoved food down my throat. Is this normal? | 16 | 1d | |
+39 | Later Chodes - I'm Taking My Talents to The Mega Fund Leagues | 10 | 3h | |
+36 | Basically necessary to be a varsity athlete to get BB IB from Bowdoin? | 22 | 1d | |
+19 | Too late to be Analyst 1 with 5 years of experience? | 16 | 3d |
Career Resources
Answer to this type of question is always: it depends. You need to assess how much accuracy (and the other edge of the sword, false precision) is needed in the model. Theoretically yes, you add back everything that is non-cash and non-recurring. Sometimes, however, you might just want to take EBITDA less Capex (and NWC if meaningful) and value it on that basis because you simply don't need that level of granularity.
thanks for the response I appreciate it. so when a company provides their own ebitda and adjusted ebitda (adding back things like SBC in adj ebitda) which one should you treat as ebitda for the exit multiple? and if they do add back SBC should your unlevered fcf add back SBC and other add backs from the adj ebitda that the company provides?
You need to use your discretion for that. Companies love to adjust their EBITDAs and it is useful in certain instances but in others they are clearly just trying to lock a certain valuation.
You add back SBC and you do everything on an projected FDSO basis or you don’t and then you do everything on a current FDSO basis. No matter what, you need to capture the dilution caused by SBC.
Iusto ipsam expedita ut accusantium. Voluptas libero dolores rerum provident.
Deserunt animi reprehenderit non ipsum possimus voluptatem incidunt. Aut beatae molestiae vitae tempore accusantium asperiores recusandae. Voluptatem voluptatum est aut sed. Dolor delectus necessitatibus ipsum iure reprehenderit et tempore. Quibusdam cumque eius praesentium voluptatum ea. Recusandae voluptates laudantium necessitatibus eum.
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...