Free Cash Flow (FCF) Calculator
Calculate free cash flow — the cash a business generates after accounting for capital expenditures. Use it to assess financial health, dividend capacity, debt repayment ability, and intrinsic value.
How to use this tool
- Enter operating cash flow (cfo) and capital expenditures (capex) in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your free cash flow (fcf) and the full breakdown beneath it.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
FCF = Operating Cash Flow − Capital Expenditures
Operating Cash Flow is taken directly from the cash flow statement (CFO). CapEx is cash spent on property, plant, equipment, and other long-term assets. A positive FCF means the business generates surplus cash after maintaining and expanding its asset base.
How it works
Free cash flow (FCF) represents the cash left over after a company has paid for its operating expenses and capital expenditures necessary to maintain or expand its asset base. It is a key indicator of financial flexibility: positive FCF can fund dividends, share buybacks, debt repayment, or acquisitions without external financing.
FCF is preferred over net income by many analysts because it is harder to manipulate with accounting choices and directly reflects the cash-generating power of the business.
Worked example
Company with $500,000 operating cash flow and $150,000 CapEx
- Operating Cash Flow (CFO) = $500,000 (from the cash flow statement)
- Capital Expenditures (CapEx) = $150,000
- Free Cash Flow = $500,000 − $150,000 = $350,000
- FCF as % of OCF = $350,000 / $500,000 = 70.00%
Free Cash Flow is $350,000. After all capital investment, the company retains 70% of its operating cash flow as free cash.
Common mistakes to avoid
- Using net income instead of operating cash flow (CFO) as the starting point — net income includes non-cash charges and working capital changes; CFO from the cash flow statement already adjusts for these.
- Deducting total capital expenditures including maintenance CapEx when the intent is to measure growth FCF — some analysts separate maintenance from growth CapEx for different analytical purposes.
- Treating positive FCF as equivalent to profitability — a company can have positive FCF while reporting a GAAP net loss (e.g., due to D&A being a large non-cash charge).
Key terms
- What is operating cash flow?
- Operating cash flow (CFO) is the cash generated by a company's core business operations, found on the cash flow statement. It excludes cash from investing and financing activities.
- What are capital expenditures (CapEx)?
- CapEx is cash spent to acquire, upgrade, or maintain physical assets like property, buildings, equipment, and technology. It is found in the investing section of the cash flow statement.
- What is the difference between FCF and net income?
- Net income is an accounting measure affected by non-cash items like depreciation, amortisation, and accruals. FCF is a cash-based measure that shows actual cash available after maintaining the business's capital base.
- What is a good FCF yield?
- FCF yield (FCF / market capitalisation) above 5–8% is often considered attractive by value investors, indicating the business generates substantial cash relative to its market price. Context varies by industry and growth stage.
Frequently asked questions
- Where do I find operating cash flow and CapEx in financial statements?
- Operating cash flow appears in the cash flow statement under 'Cash from Operating Activities.' CapEx (capital expenditures) appears in the investing activities section, usually labeled 'Purchases of property, plant, and equipment.'
- Why is free cash flow important for valuation?
- FCF represents actual cash the business generates after maintaining and expanding its asset base. It funds dividends, buybacks, debt repayment, and acquisitions, making it the foundation of DCF valuation models.
- Can a company have high earnings but negative free cash flow?
- Yes. Heavy investment in CapEx or working capital can result in negative FCF even when accounting earnings are strong. This is common in fast-growing companies reinvesting aggressively.