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Couldn't get my head around this adjusted CFO in the equity topic to calculate the P/CF ratio.
Since IFRS allows interest expense to be classified under CFO or CFF and US GAAP under CFO, we have to adjust CFO by adding back the after-tax interest cost.
Adjusted CFO = CFO + [ net cash interest outflow x (1 - tax rate) ]
This adjustment seems to be for US GAAP as interest expense is deducted from CFO. (Please correct me if i'm wrong.)
However, there's one question in schweser asking to calculate P/adjusted CF but the right answer includes deduction of non recurring expense.
How would I know when to include nonrecurring expense as the formula given in the syllabus don't seem to include that.