# FFO / Net Debt Ratio Calculation for Iberdrola SA (2022)

## S&P Methodology Overview
The FFO (Funds From Operations) / Net Debt ratio measures financial leverage and debt servicing ability. 

**FFO = Net Income + Depreciation & Amortization + Deferred Taxes - Changes in Working Capital**

**Net Debt = Total Debt - Cash and Cash Equivalents**

## Step 1: Calculate FFO for 2022 (Year ending 2023-01-01)

From the income statement and cash flow statement:

**Net Income (continuing operations):** 5,131 million EUR

**Add: Depreciation, Amortization & Impairment:**
- "Depreciation Amortisation And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = 4,774 million EUR

**Add: Deferred Tax Liabilities (as proxy for deferred taxes):**
- Deferred Tax Liabilities change: 11,682 - 11,364 = 318 million EUR

**Changes in Working Capital (from cash flow adjustments):**
- Adjustments for decrease/increase in receivables: -1,701 million EUR
- Adjustments for decrease/increase in inventories: 521 million EUR
- Adjustments for increase/decrease in payables: 44 million EUR
- Total WC impact: -1,136 million EUR

**FFO Calculation:**
FFO = 5,131 + 4,774 + 318 + 1,136 = 11,359 million EUR

## Step 2: Calculate Net Debt for 2022

**Total Debt (as of 2023-01-01):**
- Noncurrent Financial Liabilities: 44,216 million EUR
- Current Financial Liabilities: 25,079 million EUR
- Total Debt = 69,295 million EUR

**Less: Cash and Cash Equivalents:**
- Cash = 4,608 million EUR

**Net Debt = 69,295 - 4,608 = 64,687 million EUR**

## Step 3: Calculate FFO / Net Debt Ratio

FFO / Net Debt = 11,359 / 64,687 = 0.1755

<answer>0.18</answer>