Question

hye, can somebody help me on Cash Flow From Operation (CFO) in audited account. I seen one company they (auditor) included short-term liabilities in account payable and thus it affect the movement in working capital for CFO calculation. Should i excluded it to calculate Free Cash Flow??

Answer 1

I suppose you would have to understand the nature of these short term liabilities, bcoz if they are trade related then its ok have them in the FCF, whereas if they mean any kind of capital , then it should be excluded

Answer 2

If the short term liabilities are in fact maturing in one year then any change in these liabilities would involve a cash outflow and this cash outflow would need to be reflected in the CFO.