Business valuation A

8 important questions on Business valuation A

What is Depreciation (Afschrijving)

It is a principle of accural accounting that matches expenditures made for long-lived assets against the revenues they help generate.
  • The actual expenditure of cash may have taken place many years earlier when the assets were acquired.

How do you calculate the cash flow from operating activities?

= (Sales - cost of goods sold - operating expenses incl. Depreciation - tax rate + Depreciation)

What are Non-current liabilities?

Long-term debt. Longer then 1 year
Equity (Money that belongs to the owner of the company)
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What is working capital

This are the short term assets and liabilities

How is the value of the firm determined?

The value of the firm is determined by the cash flows that a firm can generate in the future.

If there is an increase in trade receivables, what does this mean for the FCF?

An increase in trade receivables will increase the firm's cash required for working capital, therefore cause FCF to decrease

If there is a decrease in gross profit, what does this mean for the FCF?

A decrease in gross profit means lower operating cash flow, therefore cause FCF to decrease

If there is a increase in property, plant, and equipment (PPE), what does this mean for the FCF?

An increase in PPE, will decrease FCF due to an investment in capital expenditures.

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