q.73 (bpp revision kit_Wurall_6/04,amended)

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November 18, 2014 at 8:17 am #210868
amisalut
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Dear tutor,

In answer to part a) of this question in calculation of FCF changes in working capital are calculated as changes in ALL current assets (including cash) and changes in all current liabilities (including ST loans and overdraft), is it right? Shouldn’t we just calculate changes in inventory, receivables and other payabes?
November 18, 2014 at 10:32 am #210938
John Moffat
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The answer is correct. We are trying to calculate the cash available for shareholders and therefore changes in the cash balance being maintained will affect the amount available.
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