The formulas
- FCF = cash flow from operations - capital expenditures
- FCFF = FCF + interest paid x (1 - tax rate)
- FCFE = FCF + net borrowing
- FCF margin = FCF / revenue
How it works
Free cash flow is the cash a business produces after keeping its asset base in shape. Under US GAAP, interest paid sits inside operating cash flow, so plain FCF is already after interest. FCFF adds back after-tax interest to show cash available to all capital providers, and is what a WACC-based valuation discounts.
FCFE adds net borrowing to show cash available to shareholders, and is what a cost-of-equity valuation discounts. Leave the optional fields blank to see plain FCF only. Use the cash flow statement figures for the same period.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
Why after-tax interest for FCFF?
Interest is deductible. The tax saving is captured in the discount rate through the after-tax cost of debt, so it is removed from the cash flow.
Is capex net of asset sales?
Use net capex if asset sales recur. Leave one-off disposals out.
Can FCF be negative for a healthy firm?
Yes, during heavy investment. Check whether the spending earns above the cost of capital.
Formulas on this page are the standard definitions.
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