Equity Net Cash-Flow

Posted in Finance, Accounting and Economics Terms, Total Reads: 1287
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Definition: Equity Net Cash-Flow

Equity net cash-flow refers to the cash generated for shareholders each year after deduction of certain "non-discretionary" expenses, such as interest on debt, income tax, capital expenditure (capex), etc. The net remaining cash is called the "free cash flow", which can be used to pay a dividend or can be retained in the business for expansion and development.

EQUITY NET CASH FLOW =

FREE CASH FLOW- NET REPAYMENT OF DEBT PRINCIPAL- AFTER TAX INTEREST ON DEBT

This can also be calculated as:

EQUITY NET CASH FLOW=                                  

 PROFIT AFTER TAX (PAT)

+            DEPRECIATION

-          CHANGES IN NET WORKING CAPITAL

-          CHANGES IN FIXED ASSETS AT COST

-          NET REPAYMENT OF DEBT PRINCIPAL


Hence, this concludes the definition of Equity Net Cash-Flow along with its overview.

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