Cash Flow Calculations
- 02:52
Calculating various cash flow calculations
Transcript
Okay, we're in the model now, and we are going to calculate the relevant cash flows that we need for our credit analysis. We're gonna start with our funds from operations, which is simply our operating cash flow and taking away any impact from changes in operating working capital. So I'm gonna link that in, operating cash flow, link in my change in operating working capital, and simply calculate total funds from operations as the operating cash flow minus the change in operating working capital. So we're mixing out the impact of changes in operating working capital.
Then we'll move down and calculate free operating cash flow. We're gonna take our operating cash flow and we're going to remove the capex. The capex is of course found in the three statement model, so I'm gonna go there and pick it up.
And there we have the capex. Sum those two up, and we'll see that we have a negative 6.8 total free operating cash flow. Moving on, the levered cash flow is our operating cash flow less our investing cash flow, that's the capex, less our debt repayments made in each year, and the debt repayments are forecasted in the three statement model, so we're gonna go there and pick that up.
And then we sum all of those three up, and we'll see that we get a total levered cash flow of minus 13.7.
Moving on, we then look at cash conversion operating cash flow compared to EBITDA. We pick up our operating cash flow, 42.5 up here, and then we pick up the EBITDA from the three statement model.
There we have it, and if we compare the operating cash flow then to our EBITDA, we get our cash conversion, and we see in Smithy's case, the cash conversion is a pretty low 31.8%. And of course, the less of EBITDA turns into cash cashflow in the end, the less useful that EBITDA is to have around.