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Sum based on FCFF and FCFE
AFM
answered on 06-Aug-24 16:19
Regarding the method for FCFF via Cash flow from operations, I asked a question on 16.7.23 that there is a mismatch in the format from that of Institute material as FCFF = CFO+Interest(1-Tax)-Capex from which you have thought. But this sum you have solved using the institute method only. Can you explain sir?
latest answer
We have updated the video - thanks for highlighting
S Shriram
CA Final
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7
385
Security conversion decision
AFM
answered on 19-Jul-24 10:25
Hi sir, Could you please elaborate with an example of how conversion decisions are affected by conversion price and market price from both the company's and the investor's perspective?
latest answer
If company is doing well in terms of cashflows they may want to repay the debt - but usually terms of agreement will not allow such kind of repayment. So, at the time of issue of debt itself, the agreement will specify that conversion is at the option of the lender and not at the option of the company. If equity share price is high and co. is flushed with cashflows While company may prefer to repay, the Investor will want conversion of debt to equity and that is what will happen. If MP is less than conversion price, investor will want repayment
Ruthvik Reddy Adala
CA Final
★ 5K+
3
410
Swap Transaction??
AFM
answered on 16-Jul-24 19:41
My doubt is from above example if one company take loan at 3% fixed interest and another company take loan at Libor + 50bsps and both the companies enter into swap transaction how would the interest portion will be treated in accounts Sorry to ask here it may be related to FR but the concept is detailly explain here so I asked here Doubts: 1) if company one take loan at 3% fix and it done swap with another company at libor + 50bsps how would be the accounting treatment will be done? Simply on which interest they will claim deduction in income tax ... Will the company which took loan from Bank at 3% fixed interest will claim that only as deduction in income tax or it will take interest paid under floating as deduction in income tax
latest answer
On what is paid net IT deduction will be taken Eg: You convert floating to fixed, they you receive floating amt (A) from swap counterparty, pay fixed amt B to swap counterparty and Pay floating C to your lender then in books you will account the net amount expense of B+C-A ; since C = A you will account for B as interest expense. Same can be claimed as int expense under IT act
Surya Prakash
CA Final
★ 19K+
1
332
Free cash flow to Firm Model(FCFF)- Through Cash FLow method
AFM
answered on 16-Jul-24 20:08
The FCFF found via Cash flow method comprises of the following format in ICAI institute material. FCFF= Cash flow From operations + Interest (1-Tax) -/+ Capital Expenditure. But in our class we use Interest*Tax rate? Can you clarify sir?
latest answer
Excellent question Per IND AS Int expense is financing activity so when we compute CFO we add back full interest - refer page 265 of my ex employer coromandel AR 23 https://www.coromandel.biz/wp-content/uploads/2023/07/Integrated-Annual-Report-FY-2022-23.pdf Also refer pg 704 & 705 pt 18 & 20 of IND AS 7 from link below https://www.mca.gov.in/Ministry/pdf/INDAS7.pdf Per USGAAP Int expense is operating activity Refer attached screenshot of FASB . You can visit FASB and look for standard on presentation of cashflows, para ref available in screenshot. Also giving below links of US GAPP vs IFRS diff https://rsmus.com/pdf/us_gaap_ifrs_cash_flows.pdf https://kpmg.com/us/en/articles/2022/ifrs-accounting-standards-us-gaap.html#:~:text=Under%20US%20GAAP%2C%20while%20restricted,the%20statement%20of%20cash%20flows. US GAAP - When Int is part of operating activities, it is not added back to Net Income in US GAAP when we compute CFO. So when we have to adjust for Int to arrive at FCFF, we directly add back Int x ( 1-t) IND AS - when int has already been fully added back to NI when computing CFO, we have to only deduct to the extent of tax from CFO in order to arrive at FCFF - so we multiply int expense with tax ICAI material - they have copied stuff directly from international material without applying their mind Abt diff between US gaap and INDAS . Sharing copy of CFA material which shows how to compute FCFF under US GAAP ( also refer links below) https://www.cfainstitute.org/en/membership/professional-development/refresher-readings/free-cash-flow-valuation#:~:text=FCFF%20and%20FCFE%20are%20related,%E2%80%93%20Tax%20rate)%20%E2%80%93%20FCInv. https://www.investopedia.com/terms/f/freecashflowfirm.asp Conclusion - i am right ICAI material is wrong
S Shriram
CA Final
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1
539
MISTAKE
AFM
answered on 16-Jul-24 05:55
given as Less interest accrued instead of Add
latest answer
Corrected. Thanks for highlighting the same.
ezy pan
CA Final
★ 130
1
230
Finance
AFM
answered on 14-Jul-24 19:08
What is the difference between finance & money? Tried to find this but no basic explanation could be found out
latest answer
Money is a medium of exchange Finance is the business of raising money or depositing money or investing for some interest
HN G
CA Final
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1
299
Is LC is a FI?
AFM
answered on 14-Jul-24 15:46
Sir will Letter of credit will come under Financial Instrument?
latest answer
Ok sir
Surya Prakash
CA Final
★ 19K+
2
345
Increment in Working capital
AFM
answered on 14-Jul-24 11:46
Can you please share the reason why in case of working capital investment of 65 crores, the 5% increment was considered without cumulative effect. The question says, that the working capital requirement would be NPR 60 Crores 'from' the year end, leaving us with interpretation that 65 crores would be incurred every year.
latest answer
Doubt cleared. Thank you sir!
Pk Akshaya
CA Final
★ 12K+
2
332
MISTA,KE
AFM
answered on 15-Jul-24 21:11
in question 1 lacs given as 10,00,00
latest answer
I am sorry if f you got wrong idea. I am not hating you at all. in fact, I appreciate that you are highlighting errors so that we can correct our mistakes and future students do not face these issues. Also, forums is the preferred method of highlighting. just that putting it our as MISTAKE in caps in a public forum tends to create doubts in the mind of other students especially when the mistake is not a major one. Please post the mistake in forum and mark it in private and i shall correct it at earliest also writing something in caps is considered as speaking in loud voice in internet etiquette - hence wanted to highlight it. have nothing against you. in fact we do appreciate your attention to details https://www.stonybrook.edu/commcms/ombuds/pdfs/Flyer%20-%20Using%20Email%20Etiquette.pdf
ezy pan
CA Final
★ 130
3
286
MISTAKE
AFM
answered on 15-Jul-24 19:46
Increase in sale is 10K but in Solution Table it given as 10 lacs.
latest answer
Okay. got it.
ezy pan
CA Final
★ 130
2
245