medium · Investment Banking accounting
In a DCF analysis, why is the change in Deferred Revenue specifically included in the Free Cash Flow calculation?
- To account for the non-cash interest expense associated with the liability.
- To bridge the gap between 'Accounting Revenue' and 'Actual Cash Receipts' from customers.
- Because Deferred Revenue is a non-cash charge that must be added back like Depreciation.
- To ensure the terminal value accounts for the eventual liquidation of all liabilities.
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