medium · Investment Banking Valuation & Core Concepts
A company has $10 million in Deferred Revenue on its balance sheet.
When calculating the change in Net Working Capital (Δ NWC) for a DCF, an increase in Deferred Revenue acts as:
- A source of cash that increases Free Cash Flow
- A non-cash accounting adjustment with no impact on cash flow
- A use of cash that decreases Free Cash Flow
- A direct reduction to Enterprise Value
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