Cash flow after taxes (CFAT) is nearly the same thing as EBITDA, but with taxes left in.

One way to arrive at Cash Flow After Taxes is to take the net income of the business and add in interest, amortization, depreciation and other non-cash expenses. This is one item away from the formula for EBITDA, which also adds tax back in to arrive at the Earnings Before Interest, Taxes, Depreciation and Amortization.

CFAT is primarily used to gauge a company’s ability to pay a dividend. Cash Flow After Taxes can be used for a debt ratio calculation, where this cash flow is represented over the total amount of debt a business carries, to get an idea of how long it would take the business to pay off the debt if they had to, or just how capable they are of servicing their debt, based on the size of their cash flow.

Some alternative methods of computing debt ratios use EBITDA or Free Cash Flow. Free cash flow is essentially the same as operating cash flow but it reduces the cash flow by the amount of capital expenditures.

What is the Current Ratio/Liquidity Ratio?

The current ratio is a measure of a company’s liquidity, calculated by dividing current assets by current liabilities

What Does it Mean to Deleverage?

When a company “deleverages,” it means it is attempting to shrink the amount of debt on its books relative to its assets

What are the Basics of Stocks?

This article and the ones that follow should give you a solid foundation in the knowledge of stocks and their use as...

Who Administers a 401(k)?

A 401(k) plan Administrator will usually be an officer of the Employer sponsoring the plan

What are the Withdrawal Rules for My Keogh Plan?

Once you are age 59½, you may begin to make penalty-free withdrawals and only pay income taxes on the amount you withdraw

What is Mortgage Par Rate?

Par rate is the fair market value of a loan for a person with certain risk characteristics, from a lending institution

What is the Rising Pennant (Bullish) Pattern?

The Rising (Bullish) Pennant pattern looks like a pennant. It forms when rising prices experience a consolidation period

What is the Symmetrical Triangle Top (Bullish) Pattern?

The Symmetrical Triangle Top pattern forms when a currency pair price fails to retest a high or low and forms two trend lines

What is Terminal Value?

Terminal value is a term used in value calculations looking forward toward the future value of an asset or cash flow

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