Debt-Adjusted Cash Flow - DACF

AAA

DEFINITION of 'Debt-Adjusted Cash Flow - DACF'

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

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s ...
  3. Accounting

    The systematic and comprehensive recording of financial transactions ...
  4. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  5. Earnings

    The amount of profit that a company produces during a specific ...
  6. Financing

    The act of providing funds for business activities, making purchases ...
RELATED FAQS
  1. What does inventory turnover tell an investor about a company?

    The inventory turnover ratio determines the number of times a company's inventory is sold and replaced over a certain period. ... Read Full Answer >>
  2. What is a deferred tax liability?

    A deferred tax liability is an account that is listed on a company's balance sheet and occurs when its taxable income is ... Read Full Answer >>
  3. What are the tax benefits of establishing a sinking fund?

    The primary tax benefit available through the creation of a sinking fund is a deduction for interest payments made. The other ... Read Full Answer >>
  4. What are the pros and cons of using the fixed charge coverage ratio?

    One main advantage of using the fixed-charge coverage ratio is it provides a good, fundamental assessment for lenders or ... Read Full Answer >>
  5. What are the disadvantages of using the sinking fund method to depreciate an asset?

    Using the sinking fund depreciation definitely impinges on a company's cash flow and profitability during the depreciation ... Read Full Answer >>
  6. How does inventory accounting differ between GAAP and IFRS?

    There are three common methods for inventory accountability costs: weighted-average cost method; first in, first out, or ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Ratio Analysis Tutorial

    If you don't know how to evaluate a company's present performance and its possible future performance, you need to learn how to analyze ratios.
  2. Active Trading

    Oil And Gas Industry Primer

    Before jumping into this hot sector, learn how these companies make their money.
  3. Investing Basics

    Getting To Know Stock Screeners

    Finding good stocks can be like finding a needle in a haystack. But these invaluable tools can help.
  4. Fundamental Analysis

    Accounting For Differences In Oil And Gas Accounting

    How a company accounts for its expenses affects how its net income and cash flow numbers are reported.
  5. Economics

    Explaining the Cash Budget

    A cash budget is a plan for the inflows and outflows of cash for a business or an individual.
  6. Economics

    What is Involved in Inventory Management?

    Inventory management refers to the theories, functions and management skills involved in controlling an inventory.
  7. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.
  8. Economics

    Explaining Activity-Based Costing

    Activity-based costing (ABC) is a managerial accounting method that assigns certain indirect costs to the products incurring the bulk of those costs.
  9. Economics

    What is a Contra Account?

    A contra account is an offset that reduces the value of a related account.
  10. Economics

    What is an Impaired Asset?

    An impaired asset is one where the fair market value of the asset is less than the historical cost (or book value) of the asset.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center