Free Cash Flow Calculator

What is Free Cash Flow (FCF)?

Free Cash Flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow measures the actual cash left over for expansion, debt reduction, dividend payments, and share buybacks.

Free Cash Flow Formulas

There are three common ways to calculate free cash flow depending on the financial statements available:

• From Operating Cash Flow: $$\text{FCF} = \text{Operating Cash Flow} - \text{Capital Expenditures}$$
• From Net Income: $$\text{FCF} = \text{Net Income} + \text{Depreciation \& Amortization} - \text{Change in Working Capital} - \text{CapEx}$$
• From EBIT (Operating Income): $$\text{FCF} = \text{EBIT} \times (1 - \text{Tax Rate}) + \text{Depreciation \& Amortization} - \text{Change in Working Capital} - \text{CapEx}$$

Why is Free Cash Flow Important?

Investors and financial analysts closely monitor FCF because it is harder to manipulate than net income. Positive free cash flow indicates that a company is generating more cash than it needs to run its business, providing financial flexibility and stability.