Question
If capex increases in a forecast, what is the immediate effect on free cash flow?
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Answer
Free cash flow decreases.
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Question
If Days Sales Outstanding rises, what happens to receivables and operating cash flow, all else equal?
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Answer
Receivables rise and operating cash flow falls.
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Question
Why must PP&E be tied to capex projections in a financial statement model?
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Answer
Because capex drives the future asset base and related depreciation.
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Question
After projecting the income statement and balance sheet, how are cash flows derived in a pro forma model?
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Answer
From projected earnings and balance sheet changes.
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