why do we do ebit*(1-tax) while calulating FCF, particular abt (1-tax) why post tax ebit

Question

anonymous · Answer

It is because the company wants to show how much cash flow ia available with them in hand for the growth of the company. A cash flow which they can utilise. Tax would be definitely paid off to the government, it is not coming back. So, it would not be utilised in the company. Therefore, it has to be deducted from the profits to show how much remains with the company for growth. Adding 2 links about Cashflows http://financialdoodle.wordpress.com/2012/07/10/cash-flow-statement-explained/ http://financialdoodle.wordpress.com/2012/07/17/fcf-fcff-and-fcfe-uncluttered/

anonymous · Answer

Hey thank you so much