I can't believe you are that ignorant. Are you sure you are involved in mergers and acquisitions? People actually pay you for your advice and you can't grasp a simple cash flow example? You need help.
Like I said, assume the ONLY ITEM A COMPANY has is the reversal of an allowance ALL to the income statement of $100. The impact of that would produce net income of $100. The preparation of the cash flow statement starts with net income after taxes but for simplicity's sake (and also the simple minded) I am ignoring the tax impact. BTW, the reversal of an allowance for deferred taxes would have zero income tax impact but I am certain you wouldn't understand this and I am not about to try to explain it to you.
So the cash flow statement begins with net income of $100. No cash was produced by this net income since all that happened was an accounting entry and NO CASH CHANGED HANDS. Therefore, the cash flow statement has a section for adjustments for these types of items and you would SUBTRACT $100 from the top line? Can you figure out what 100 minus 100 equals? If so, then you know what the reversal of ANY allowance will produce as far as cash flow.
Unfortunately with the way you spread misinformation on this board, you will ignore all of the above and twist it to try to produce some example by the stretch of the imagination to support your incorrect theory. I have produced several examples clearly showing you are wrong and you don't know squat about FCF and yet you continue to debate the issue. Like I said in an earlier post, the reversal by itself doesn't change taxes by any amount, taxes are computed based on the income tax return, not the financial statement and the reversal has no impact on taxable income which is what determines how much in taxes are paid. Your a gem.
You said:
"tell me how the reversal of a reserve produces ANY CASH" - I believe the use of this particular reserve REDUCES cash taxes otherwise paid, and thereby SAVES cash, right? WRONG
Per your formula, FCF starts with "net income", by which you mean "net income AFTER taxes", right? So if taxes are reduced, then cash flow is increased, right? WRONG AGAIN, READ THE ABOVE EXAMPLE
Isn't this the case with some of this deferred tax asset reserve reversal? WRONG AGAIN
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