BUS 315 Chapter Notes - Chapter 2: Deferred Tax, Current Liability, Quick Ratio

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 315
• Professor: Greta Fensenko

Document Summary

Roic = ebitda/ic (bop) = ebitda margine x ic turnover not the market rate of return but rather only the company"s rate of return. Roic (after tax, after depreciation) = (ebitda-da)(1-t)/icbop invested capital turnover = sales/ic tells us everyone 1$ invested in capital generate of sales. Increase sales without increase invested capital is best high ic turnover -> low ebitda due to competition. When roe > roic then shareholders benefit because roic is high. 2 types of cash flows = trade capital increments (inflow) and capital expenditure (outflow) free = means that it is available to distribute the shareholders and creditors operating def. of fcf = ffo - incremental business activities. Funds from operations = [ebitda cca] (1 tax rate) + cca. Ffc tells us what is the benefit from the past business activities or ffo = undo everything done to net income.