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Variant of Discounted Cash Flow method

nuovo metodo di valutazione
valutazione azienda

Proposal for a new method of valuation, consisting in a variant of Discounted Cash Flow (DCF), particularly indicated for the estimation of that firms who at the date of valuation are in state of crisis or simply have a high non-cash working capital.

Formula (Asset Side):




Cash Flow from Operating Investments (CFOI) = Nopat – Net Cap Ex


The cash flow deriving from operating investments (CFOI) included in the formula are represented in the following example:



– Tax


= Nopat


 + Depreciation


– Cap Ex





The idea, in order to bring the value of the company closer to that of its assets, making the estimate made more “palpable”, is to remove the changes in net working capital from the calculation of operating cash flows, considering the absolute value existing at the date valuation as an equity component (stock); in this regard, it should be considered that the items of net working capital are very close to the numerary and fully enter the primary corporate liquidity indicator.

That is, when estimating the company, it seems appropriate to consider the Non-Cash Working Capital (NCWC) as stock rather than in terms of the variation affecting the cash flow also due to the fact that the components of the net working capital are all destined to fall over time from a point of financial view.

Thus, for example, if Accounts Payable increase during the year, it does not appear justified to improve cash flow (generating the increase in accounts payable a reduction in net non cash working capital change for the year) given that at the end of the fair they, once formed for effect of the management of the company, they will in any case have to be paid. Rather than “polluting” the operating cash flow – which will then be discounted and capitalized in the terminal value – it would therefore seem more logical to simply deduct the value of the debt formed at the date of the estimate. The same is true, on the contrary, for Accounts Receivable, since if they grow over the course of a year it does not appear rational to reduce the operating flows of the same year (in this case generating an increase in the NCWC) given that they are generated in any case for effect of carrying out the business activity and, hopefully, later cashed.

In fact, it is difficult to explain to an entrepreneur why the value of the net working capital at the date of the estimate is not taken into consideration despite being there and having been formed precisely as a result of the company’s operational activity.

Furthermore, if a company is in crisis, it can also imagine carrying out debt restructuring operations that could not fail to include those of an operational nature, such as those to suppliers, social security institutions, the Treasury, and other reimbursed in net working capital.

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