before-tax cash flow

Before-Tax Cash Flow

The cash flow a person or company realizes after subtracting debt service and other expenses but not tax liability. Before-tax cash flow represents cash available to pay off creditors in the event of liquidation. While it is an important measure, it is not as closely watched as earnings before interest and taxes.

before-tax cash flow

The amount of money generated by an investment after collection of all revenues and payment of all bills, but without any deductions for depreciation or other noncash items, and before calculation of income tax consequences. An important figure in analyzing any investment,because properties with high depreciation expenses may show tax losses but positive cash flows.In the alternative,a property that requires expensive financing for acquisition or operation may show good net income figures for accounting and tax purposes, but have a negative cash flow requiring the owner to supplement the property with money from other sources.

References in periodicals archive ?
Year 0 Year 1 Year 2 Year 3 PANEL A Before-tax cash flow ($1,000) $100 $100 $1,100 (CF) Basis $1,000 $1,000 $1,000 $1,000 Taxes on coupons ($28) ($28) ($28) After-tax CF ($1,000) $72 $72 $1,072 After-tax yield (IRR) 7.20% PANEL B Basis $918.71 $956.52 $1,000 Accrued interest 81.29 Taxes on accrued ($22.76) interest Capital loss -81.29 Tax shield from $22.76 capital loss After-tax CF ($1,000) $94.76 $72 $1,049.24 After-tax yield (IRR) 7.31% Incremental after-tax CF $22.76 $0 ($22.76) EXHIBIT 3 Incremental After-Tax Cash Flows of Increasing-the-Basis- Above-Par Strategy The bond has 10% annual coupon, three-year maturity, is purchased at par, and the yield changes from 10% at the beginning of the Year 1 to 5% at the end of Year 3.
Often value is estimated using a debt-free assumption, where net operating income [NOI] and before-tax cash flow [BTCF] are the same amount.
The estimate of the before-tax cash flow or amount that will affect an after-tax cash flow, e.g.
PGI = Potential gross income V&RL = Vacancy and rent loss EGI = Effective gross income OE = Operating expenses NOI = Net operating income DS = Debt service + interest BTCF = Before-tax cash flow TAXES = Federal and state income taxes ATCF = After-tax cash flow
Subtracting $80 interest expense, before-tax cash flow is $20.
Interest expense (10% of an $800 loan) is also subtracted, to result in annual before-tax cash flow of $20.
That tax is then subtracted from the before-tax cash flow. If taxable income is zero, there is no income tax in that year, so after-tax cash flow is the same as before-tax cash flow.
Again, it should be noted in Table 2 that the property generates $20 of before-tax cash flow. Because of the non-cash deduction for depreciation, a tax loss of $9.09 is provided each year.
Other simulations were run in which before-tax cash flow was less than the benchmark, and accordingly, tax losses were greater.
COMPAQ'S BEFORE-TAX CASH FLOWS FROM ITS TRANSACTION IN SHELL STOCK.
The after-tax CCFs are just the before-tax cash flows to both debt and equity, reduced by taxes including interest tax shields.
Again the proof is that the before-tax cash flows to the equity position of $5,740,645 equate to an IRR of 18.27%.