Determining Factors in Free Cash Flow Calculation

Easy Equity Valuation Techniques Free Cash Flow Models

When evaluating a company's stock using Free Cash Flow (FCF) models, one primary consideration is how to calculate Free Cash Flow accurately. FCF is generally calculated as operating cash flow minus capital expenditures. This value is integral in determining the intrinsic value of a company's equity. However, an equity analyst should also be mindful of other elements that can affect the FCF calculation.

Which of the following factors would NOT typically be considered in the calculation of Free Cash Flow?

Operating expenses that are deducted to arrive at net income

Depreciation and amortization expenses added back to net income

Dividends paid out to shareholders in the current period

Hint

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