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Free Cash Flow to Equity (Indirect Method)

This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.

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July 29, 2017 at 5:03 am #399227
sarose12
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Why is interest deducted to Free cash flow at net of tax (why not full interest expense) to calculate free cash flow to equity in indirect method?
July 29, 2017 at 7:57 am #399231
John Moffat
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The full interest expense is deducted.
What we do is calculate what the after tax profit would be if there was no interest. Then subtract the interest net of tax.
It will give the same result as taking the profit after full interest and then subtracting the tax.
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