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Cfat

Manohar (Student ) (69 Points)

22 May 2016

While computing CFAT according to long term funds approach, why interest expense should be adjusted for tax while adding back whereas depreciation is not adjusted.(i.e..PAT+Depreciaton+Inteest adjusted for tax = CFAT)

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mohammad rasool baig (Management Consultant) (1026 Points)
Replied 24 May 2016

In long term funds approach, we wanted to understand the cash flows for the long term funds.

So long term funds will include the capital funds & debt funds. Hence we include the interest once again but after giving effect to tax because tax shelter needs to be deducted if we wanted to consider the interest portion in cash flows.