What is a 'Debt-Adjusted Cash Flow - DACF'
A debt-adjusted cash flow (DACF) is a financial ratio commonly used in the analysis of oil companies, representing the after-tax operating cash flow, excluding financial expenses after taxes.
Debt-adjusted cash flow (DACF) is calculated as follows:
DACF = cash flow from operations + financing costs (after tax) + exploration expenses (before tax) +/- working capital adjustment
BREAKING DOWN 'Debt-Adjusted Cash Flow - DACF'
DACF is often used in the financial ratio EV/DACF, where EV is the enterprise value of the company being analyzed. This ratio is used in place of EV/EBITDA as a valuation ratio. This ratio is good for use in the oil industry because it is an after-tax calculation (good for an industry with high resource taxes) and independent of companies' financing decisions.