Dec 25 2012 03:57 PM
i posted this against sir reply,honestly speaking i dont agree with your answer because the whole purpose for what d&a is considered to arrive at is to get free cash flow to discount it to arrive at E.V.
NOW EBITDA Means all cash derived(left) from operations of business after paying operating expense but from that we have not paid interest, tax, and d&a not yet deducted to get net income,
if we deduct d&a then also cash would remain same because d&a is book entry and we will arrive at EBIT,
NOW from this EBIT if we want to come at free cash flow we have to add back d&a to get actual cash flow, now from this capex during the year deducted and increase in working capital lessened, if decrease in w.c added to arrive at free cash flow.
so we saw above when we start from EBITDA we first less d&A and then afterwards add so effect is null, so there is no need to consider d&A when ebitda is given. but if question or facts given starts with EBIT(i.e earning before interest and tax but after deducting non cash d&a) then we add noncash expense d&a to arrive actual cash flow then we consider capex and w.c to arrive at free cash flow
i hope binny sir you got the point from above explanation am i right i want your reply asap