How do companies pay DIVIDENDS if their Levered Free Cash Flow is a NEGATIVE NUMBER PLEASE HELP?
You are on track with your understanding, but The levered free cash flow listed in Yahoo Finance key statistics is NOT real or correct it is a normalized number useful for comparing companies but the number itself (-$21.26m) is not correct. Formula: (EBIT + Interest Expense) * (1 – Tax Rate) + Depreciation & Amort., Total + Other Amortization + Capital Expenditure + Sale (Purchase) of Intangible assets – Change in Net Working Capital + Pref. Dividends Paid + Total Debt Repaid + Total Debt Issued + Repurchase of Preferred + Issuance of Preferred Stock Where: Tax Rate = 0.375 This figure is a normalized item that excludes non-recurring items and also takes into consideration cash inflows from financing activities such as debt or preferred stock issuances. Rely only on Financial Statement Cash Flow numbers. Yahoo’s approach to Levered free cash flow can lead to misconceptions.
