Free Cash Flow Calculator

{

Reviewed by: **Dr. Emily White, PhD in Corporate Finance**
Investment specialist and expert in intrinsic valuation using discounted cash flow models.

The **Free Cash Flow (FCF) Calculator** determines the cash a company generates after covering its operating expenses and capital expenditures. FCF is the true measure of a company’s financial flexibility. Enter any three of the four key variables to solve for the missing one.

Instructions: Enter values for any three of the four core parameters to solve for the missing one.

Cash Flow Metrics ($)

Operating Cash Flow ($OCF$) – [Q]

Capital Expenditures ($CapEx$) – [F] Note: $CapEx$ is usually entered as a positive outflow.

Net Income ($NI$) – [P] (Auxiliary Check) Note: This field helps estimate $OCF$ if $D$ and $\Delta WC$ are known.

Free Cash Flow ($FCF$) – [V]

Free Cash Flow Formula

FCF is calculated by subtracting Capital Expenditures (CapEx) from Operating Cash Flow (OCF):

$$FCF = OCF – CapEx$$

Alternatively (starting from NI):

$$FCF = NI + D + \Delta NWC – CapEx$$ Formula Source: Investopedia

Variables Explained (Q, F, P, V – Parameters)

$OCF$ (Operating Cash Flow, $Q$): Cash generated by core business operations (before CapEx).
$CapEx$ (Capital Expenditures, $F$): Cash spent on acquiring or upgrading long-term assets (PP&E).
$NI$ (Net Income, $P$): The accounting profit (Used as an auxiliary check).
$FCF$ (Free Cash Flow, $V$): The cash available to debt holders and equity holders.

Related Cash Flow and Valuation Calculators

Use these tools to analyze intrinsic value and cash availability:

What is Free Cash Flow (FCF)?

**Free Cash Flow (FCF)** is a core financial metric that represents the cash remaining after a company has paid its operating costs and funded its necessary capital expenditures (CapEx). It is called “free” because this remaining cash is available for the company to freely distribute to investors, pay down debt, or save for future opportunities.

FCF is often considered a superior measure of profitability compared to Net Income because it is less susceptible to accounting maneuvers (like aggressive revenue recognition or non-cash charges) and reflects the actual cash that flows through the business. It is the primary input used in Discounted Cash Flow (DCF) valuation models.

How to Calculate FCF (Example)

Assume a company has the following data:

Operating Cash Flow ($OCF$) = \$240,000
Capital Expenditures ($CapEx$) = \$40,000

We solve for FCF:

Step 1: Determine the OCF (Cash from Operations)
$$OCF = \mathbf{\$240,000}$$
Step 2: Subtract Capital Expenditures
$$FCF = OCF – CapEx$$
Step 3: Calculate the Result
$$FCF = \$240,000 – \$40,000 = \mathbf{\$200,000}$$

The Free Cash Flow is $\mathbf{\$200,000}$.

Frequently Asked Questions (FAQ)

Why is FCF important for investors?

FCF is crucial because it represents the pool of cash available to investors (both equity and debt holders). Companies with high and consistent FCF are typically better positioned to increase dividends, buy back shares, and weather economic downturns, making them highly desirable investments.

Is FCF the same as Cash from Operations?

No. Cash from Operations ($OCF$) measures the cash flow generated by core business activities. FCF subtracts Capital Expenditures ($CapEx$) from $OCF$. Thus, FCF is always less than or equal to OCF.

Can FCF be negative?

Yes. A negative FCF typically occurs in high-growth companies that are aggressively reinvesting profits into their business (high $CapEx$). While negative FCF can signal growth potential, consistently negative FCF in mature companies is a red flag indicating insufficient cash generation to maintain or expand operations.

Does the FCF calculation include Net Income ($NI$)?

The standard formula uses $OCF$, but since $OCF$ can be derived from $NI$ (by adding back depreciation and adjusting for working capital changes), FCF is indirectly linked to $NI$. Many analysts use the $OCF – CapEx$ method for simplicity.

}