Hi all,
Just to preface, I do not have formal experience in investment banking or financial modelling, but I have been teaching myself with resources available online. I am perfectly comfortable with building an operating model (integrated 3 statements) and lbo model, but I am learning how to model cash sweeps.
I have seen examples of when excess cash flow is calculated as follows:
EBITDA Less: Cash interest Less: Cash taxes Less: Capex Less: Mandatory paydown Excess cash flow for cash sweep
where working capital changes is not removed. I tried building the cash sweep in, but my balance sheet went all off until I removed working capital changes in the calculation. Intuitively, I am right to remove the item but another person's model balanced all the same without it.
Can anyone help me with explaining why I should or should not remove working capital changes?
Yes, it is a real cash item after all.
WTF? Never seen W/C being removed for XSCF calculation purpose - and I have been through dozens of SFAs
Try to think about it logically: why would a borrower sweep cash to its lenders before reinvesting the minimum amount necessary for the business on a going concern basis (ie w/c and maintenance capex)? I mean, even from a lender's perspective that would be like shooting in his own foot. Conclusion: XSCF is after change in W/C.
Thanks! That makes sense, exactly what I thought as well.
WTF? Never seen W/C being removed for XSCF calculation purpose - and I have been through dozens of SFAs
Try to think about it logically: why would a borrower sweep cash to its lenders before reinvesting the minimum amount necessary for the business on a going concern basis (ie w/c and maintenance capex)? I mean, even from a lender's perspective that would be like shooting in his own foot. Conclusion: XSCF is after change in W/C.
Est quia magni harum sed sit voluptatem aspernatur. Doloremque atque quia excepturi id dolorem.
Ullam ut in perferendis officia corporis natus illo. Quae voluptas et fugiat fugit. Voluptatem voluptates consequatur et sed sequi. Culpa quod similique incidunt impedit consequatur. Sint dolores ducimus consequuntur earum. Sit sapiente quia fugit totam vero qui non. Libero nobis molestiae asperiores quas delectus quia rerum.
Sunt aut non unde quia facilis. Dignissimos possimus soluta quibusdam quisquam et maxime provident ex. Dolorem ipsum sed quaerat atque non dolorem quo.
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...