Free Cash Flow (FCF) Calculator
This tool calculates the basic Free Cash Flow (FCF) of a company using a widely accepted definition:
Free Cash Flow = Cash Flow from Operations - Capital Expenditures
Enter the values for Cash Flow from Operations (CFO) and Capital Expenditures (CapEx) below.
Enter Financial Data
Understanding Free Cash Flow
What is Free Cash Flow?
Free Cash Flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. It's the cash left over that can be used to repay debt, pay dividends, buy back stock, or invest in new ventures. Unlike net income, FCF is a measure of
Basic Free Cash Flow Formula
The calculator uses one of the most common and basic definitions:
Free Cash Flow = Cash Flow from Operations - Capital Expenditures
Where:
- Cash Flow from Operations (CFO): Found on the company's Statement of Cash Flows. Represents cash generated from normal business activities (sales, expenses, working capital changes).
- Capital Expenditures (CapEx): Found within the Investing Activities section of the Statement of Cash Flows. Represents money spent on acquiring or upgrading physical assets like property, buildings, or equipment.
Note: More complex FCF calculations exist (e.g., Levered FCF, which accounts for debt principal payments), but this tool focuses on the basic, unlevered definition.
Free Cash Flow Examples
Click on an example to see how the calculation works:
Example 1: Mature, Profitable Company
Scenario: A stable company with strong operations and moderate reinvestment needs.
Known Values: Cash Flow from Operations (CFO) = $500,000, Capital Expenditures (CapEx) = $100,000.
Formula: FCF = CFO - CapEx
Calculation: FCF = $500,000 - $100,000
Result: FCF = $400,000.
Conclusion: The company generated $400,000 in free cash flow, indicating good cash generation relative to its reinvestment needs.
Example 2: Growing Company with High Investment
Scenario: A company expanding rapidly, requiring significant investment in new facilities and equipment.
Known Values: Cash Flow from Operations (CFO) = $300,000, Capital Expenditures (CapEx) = $400,000.
Formula: FCF = CFO - CapEx
Calculation: FCF = $300,000 - $400,000
Result: FCF = -$100,000.
Conclusion: The company has negative FCF, which is common for rapidly growing companies that are heavily reinvesting cash back into the business.
Example 3: Company with Operational Loss
Scenario: A company is currently operating at a loss, despite minimal capital spending.
Known Values: Cash Flow from Operations (CFO) = -$50,000, Capital Expenditures (CapEx) = $20,000.
Formula: FCF = CFO - CapEx
Calculation: FCF = -$50,000 - $20,000
Result: FCF = -$70,000.
Conclusion: Negative FCF is expected when operations consume cash, even with low CapEx.
Example 4: Asset-Light Business
Scenario: A software company with high operational cash flow but very low capital expenditures.
Known Values: Cash Flow from Operations (CFO) = $800,000, Capital Expenditures (CapEx) = $50,000.
Formula: FCF = CFO - CapEx
Calculation: FCF = $800,000 - $50,000
Result: FCF = $750,000.
Conclusion: High FCF is typical for asset-light businesses that don't require much physical infrastructure.
Example 5: High CapEx for Modernization
Scenario: An manufacturing company investing heavily in modernizing its plant and equipment.
Known Values: Cash Flow from Operations (CFO) = $600,000, Capital Expenditures (CapEx) = $600,000.
Formula: FCF = CFO - CapEx
Calculation: FCF = $600,000 - $600,000
Result: FCF = $0.
Conclusion: Zero FCF indicates that all operational cash flow is being reinvested back into the business's capital assets.
Example 6: Company Issuing Debt for Operations (Not Reflected in Basic FCF)
Scenario: A company uses debt to cover operational shortfalls and CapEx. The *basic* FCF calculation doesn't show the debt.
Known Values: Cash Flow from Operations (CFO) = -$100,000, Capital Expenditures (CapEx) = $30,000.
Formula: FCF = CFO - CapEx
Calculation: FCF = -$100,000 - $30,000
Result: FCF = -$130,000.
Conclusion: The negative FCF shows the cash drain from operations and CapEx, regardless of how the company funds it (e.g., via debt or equity), highlighting the need for funding.
Example 7: Company Cutting Back on CapEx
Scenario: A company is reducing capital spending, perhaps to boost short-term cash flow or due to a downturn.
Known Values: Cash Flow from Operations (CFO) = $250,000, Capital Expenditures (CapEx) = $50,000.
Formula: FCF = CFO - CapEx
Calculation: FCF = $250,000 - $50,000
Result: FCF = $200,000.
Conclusion: Lower CapEx results in higher FCF, but this might not be sustainable if essential maintenance or growth investments are skipped.
Example 8: Company with Significant Working Capital Changes
Scenario: CFO is affected by changes in accounts receivable, inventory, etc.
Known Values: Cash Flow from Operations (CFO) = $180,000 (after positive working capital changes), Capital Expenditures (CapEx) = $70,000.
Formula: FCF = CFO - CapEx
Calculation: FCF = $180,000 - $70,000
Result: FCF = $110,000.
Conclusion: Positive FCF results from the combination of operational cash flow and CapEx, even if operations before working capital were different.
Example 9: High Operational Profit, High CapEx (Common in Heavy Industry)
Scenario: A utility or manufacturing company with high revenue and operational cash flow but also consistently high capital needs.
Known Values: Cash Flow from Operations (CFO) = $1,200,000, Capital Expenditures (CapEx) = $900,000.
Formula: FCF = CFO - CapEx
Calculation: FCF = $1,200,000 - $900,000
Result: FCF = $300,000.
Conclusion: Positive FCF, but a significant portion of operational cash is consumed by CapEx.
Example 10: Early Stage Startup (Often Negative FCF)
Scenario: A new business spending heavily on setting up operations and infrastructure before significant revenue.
Known Values: Cash Flow from Operations (CFO) = -$200,000, Capital Expenditures (CapEx) = $150,000.
Formula: FCF = CFO - CapEx
Calculation: FCF = -$200,000 - $150,000
Result: FCF = -$350,000.
Conclusion: Significant negative FCF is typical for startups as they build the business infrastructure before generating sufficient positive operational cash flow.
Understanding Cash Flow Measurement
Cash flow is a measure of the actual cash coming into and going out of a company. It differs from net income, which includes non-cash items like depreciation...
Units for FCF
Free Cash Flow is measured in the same currency units as your input values (CFO and CapEx). If you enter dollars, the result is in dollars. If you enter millions of dollars, the result is in millions of dollars. Ensure consistency in your units.
| Input Units | Output Unit (FCF) |
|---|---|
| Dollars ($) | Dollars ($) |
| Thousands ($000) | Thousands ($000) |
| Millions ($M) | Millions ($M) |
| Billions ($B) | Billions ($B) |
| Euros (€) | Euros (€) |
| Pounds (£) | Pounds (£) |
Frequently Asked Questions about Free Cash Flow
1. What is the purpose of calculating Free Cash Flow?
FCF shows how much cash a company has left after paying for its operating expenses and capital expenditures. This cash can then be used for things like paying dividends, reducing debt, or reinvesting for growth, making it a key metric for investors and analysts to assess a company's financial health and flexibility.
2. How is Free Cash Flow different from Net Income?
Net Income (or profit) includes non-cash items (like depreciation) and accrual accounting entries. FCF focuses purely on the actual cash generated and spent by the business, providing a clearer picture of liquidity and cash available for discretionary uses.
3. Where do I find Cash Flow from Operations (CFO) and Capital Expenditures (CapEx)?
These figures are typically found on a company's official financial statement called the "Statement of Cash Flows". CFO is a direct line item. CapEx is usually reported within the "Cash Flow from Investing Activities" section, often listed as "Purchase of Property, Plant, and Equipment" (PP&E).
4. What does a positive Free Cash Flow mean?
A positive FCF indicates that the company's operations are generating enough cash to cover its ongoing capital investments, leaving surplus cash available. This is generally seen as a sign of financial strength.
5. What does a negative Free Cash Flow mean?
Negative FCF means the company's operational cash flow is not sufficient to cover its capital expenditures. This might happen in rapidly growing companies (investing heavily), companies facing operational difficulties, or those undergoing significant restructuring. Persistent negative FCF without a clear growth strategy can be a red flag.
6. Is high Free Cash Flow always a good sign?
While generally positive, extremely high FCF could sometimes indicate that a company is not reinvesting sufficiently in its future growth, R&D, or maintaining its assets properly. Context is always important.
7. Are there other ways to calculate Free Cash Flow?
Yes, this tool uses the basic definition. Other definitions exist, such as starting from Net Income and adding back depreciation/amortization, adjusting for working capital changes, and subtracting CapEx. Levered FCF also subtracts mandatory debt principal payments. The calculation used here (CFO - CapEx) is common and straightforward.
8. What units should I use for input?
Use consistent currency units (e.g., just enter the dollar amounts, or enter amounts in 'millions of dollars' for both). The output FCF will be in the same unit.
9. Can I use this for private companies?
Yes, if you have access to the company's internal cash flow statement data (specifically CFO and CapEx), you can use this calculation. Public companies publish this data in their financial reports.
10. What are Capital Expenditures (CapEx)?
Capital Expenditures are funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment. They are typically significant, infrequent purchases necessary for a company's long-term health and growth potential.
