Free Cash Flow (FCF) Calculator: FCFF and FCFE
Calculates free cash flow to the firm (FCFF) and free cash flow to equity (FCFE) from operating profit, depreciation, capital expenditure and the change in working capital.
Things to keep in mind:
- The tax rate is a user input; the general corporate tax rate, reduced rates and rates for sole proprietors may differ.
- An increase in working capital reduces cash (enter it as positive); a decrease releases cash (enter it as negative).
- Lease payments (TFRS 16) and one-off items are not adjusted separately.
- This tool is for information only and is not investment advice.
Calculator
Result
Enter the values and press Calculate to see the result here.
About this tool
Free cash flow (FCF) is the cash a business has left after the investment needed to sustain and grow its operations, available to distribute to its providers of capital. Because it shows the gap between profit and cash, it is used in valuation (DCF) and to analyse dividend capacity and debt repayment ability.
There are two definitions: free cash flow to the firm (FCFF) is available to both lenders and shareholders and is discounted at WACC; free cash flow to equity (FCFE) is what remains for shareholders after debt service and is discounted at the cost of equity.
Formulas — EBIT method
- Net operating profit after tax (NOPAT) = EBIT × (1 − Tax rate)
- FCFF = NOPAT + Depreciation − Capital expenditure (CAPEX) − Increase in working capital
- FCFE = FCFF − Interest × (1 − Tax rate) + Net borrowing
Formulas — operating cash flow method
- FCFF = Cash flow from operating activities + Interest × (1 − Tax rate) − CAPEX
- FCFE = Cash flow from operating activities − CAPEX + Net borrowing
Example: with EBIT of 1,000,000 TRY and a 25% tax rate, NOPAT is 750,000 TRY. Adding 200,000 TRY of depreciation and deducting 350,000 TRY of capex and a 100,000 TRY increase in working capital gives FCFF of 500,000 TRY. With annual interest of 120,000 TRY (90,000 TRY after tax) and 50,000 TRY of net new borrowing, FCFE is 460,000 TRY.
Enter the FCFF forecast for the coming years in the DCF Business Valuation tool to obtain enterprise value.
How to use
- Choose the method: from the income statement (EBIT) or from the cash flow statement (cash flow from operating activities).
- For the EBIT method enter EBIT, depreciation and the change in working capital; for the other method enter operating cash flow.
- Enter capital expenditure (purchases of tangible and intangible fixed assets) and the tax rate.
- For FCFE enter interest expense and net borrowing (new debt − principal repaid), then press Calculate.
Notes
Amounts are rounded to the cent (HALF_UP). If EBIT is negative, tax is taken as zero (loss carry-forwards and deferred tax are not modelled). Interest is assumed to be tax deductible; restrictions such as the finance expense limitation are ignored. The operating cash flow method assumes interest paid is shown within operating activities. Lines of the method not used show 0.
Sources
Frequently asked questions
The common short method: Cash flow from operating activities − Capital expenditure. FCFF used in valuation is EBIT × (1 − tax) + depreciation − capital expenditure − increase in working capital.
FCFF belongs to all debt and equity holders and is discounted at WACC. FCFE is what is left for shareholders after interest and net debt movements and is discounted at the cost of equity.
Not always. During growth, high capex and working capital build-up can make it temporarily negative. A persistently negative flow, however, signals a need for external funding.
New loans taken in the period minus principal repaid. It is negative for a company reducing debt and lowers FCFE.
Next step
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