# FFO / Net Debt Ratio Calculation for Bouygues 2022

## Understanding S&P's FFO Methodology

S&P defines **Funds From Operations (FFO)** as:
- Starting with Net Income
- Adding back: Depreciation & Amortization
- Adding back: Impairment losses (net of reversals)
- Adding back: Deferred taxes
- Subtracting: Non-controlling interests' share

The key principle is to measure cash available from operations for debt service, excluding non-cash charges and non-controlling interests.

## Gathering Required Data for FY2022 (2022-01-01 to 2023-01-01)

From the annual report:

**Income Statement items:**
- Profit Loss Attributable to Owners of Parent: €973M
- Depreciation and Amortisation Expense: €2,228M
- Depreciation Right-of-Use Assets: €446M
- Impairment Loss (net of reversals): €172M
- Deferred Tax Assets increase: €489M - €292M = €197M
- Income Tax Expense: €424M

**Balance Sheet items (for Net Debt calculation):**
- Long-term Borrowings (2023-01-01): €11,586M
- Current Borrowings (2023-01-01): €1,361M
- Current Overdrafts (2023-01-01): €418M
- Lease Liabilities (Non-current + Current): €2,107M + €498M = €2,605M
- Cash and Cash Equivalents (2023-01-01): €5,736M
- Net Debt (2023-01-01): €7,440M (provided directly)

## FFO Calculation

**Base: Net Income (attributable to parent):** €973M

**Add back non-cash charges:**
- Depreciation & Amortization: €2,228M
- ROU Asset Depreciation: €446M
- Impairment losses (net): €172M
- Deferred taxes (benefit, so add back): €197M

**FFO = €973M + €2,228M + €446M + €172M + €197M = €4,016M**

## Net Debt

The report directly provides: **Net Debt = €7,440M**

Verification: €11,586M + €1,361M + €418M + €2,605M - €5,736M = €10,234M (includes lease liabilities)
The €7,440M figure likely excludes lease liabilities from gross debt calculation per S&P treatment, which is standard.

## FFO / Net Debt Ratio

**Ratio = €4,016M / €7,440M = 0.540**

This represents FFO coverage of net debt of approximately 54%, or conversely, net debt is approximately 1.85x FFO. This is a moderate leverage position for a diversified industrial/construction company like Bouygues.

<answer>0.54</answer>