Levered Free Cash Flow (LFCF) Calculator
Calculate levered free cash flow — the cash a business generates after meeting all its financial obligations, including debt payments. LFCF shows what remains for equity holders.
How to use this tool
- Enter net income, depreciation & amortization, capital expenditures, increase in working capital and net debt repaid (issued = negative) in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your levered free cash flow 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
LFCF = Net Income + D&A − CapEx − ΔWorking Capital − Net Debt Repaid
How it works
Levered free cash flow starts with net income (which already reflects interest expense) and adds back non-cash charges like depreciation and amortization. Capital expenditures, increases in working capital, and net debt repayments are then subtracted because they consume cash.
Unlike unlevered FCF, LFCF reflects the impact of a company's capital structure, making it equivalent to Free Cash Flow to Equity (FCFE) — the cash theoretically available to distribute to shareholders.
Worked example
Manufacturing Company LFCF
- Start with net income: $500,000
- Add depreciation & amortization: $500,000 + $80,000 = $580,000
- Subtract capital expenditures: $580,000 − $120,000 = $460,000
- Subtract increase in working capital: $460,000 − $30,000 = $430,000
- Subtract net debt repaid: $430,000 − $50,000 = $380,000
Levered Free Cash Flow = $380,000
Common mistakes to avoid
- Using EBITDA minus CapEx as a shortcut for LFCF without subtracting interest, taxes, and debt repayments — that shortcut yields unlevered FCF, not levered FCF.
- Netting only scheduled principal repayments and ignoring new debt raised: the formula requires net debt repaid (repayments minus new borrowings); raising debt actually increases LFCF in that period.
- Double-counting interest: if net income is already after interest expense, do not subtract interest again separately when computing LFCF from net income.
Key terms
- What is levered free cash flow?
- LFCF is the cash a company has available for equity holders after paying operating expenses, interest, taxes, capital expenditures, and debt obligations.
- How does LFCF differ from unlevered FCF?
- Unlevered FCF (UFCF) excludes the effects of debt financing; it represents cash available to all capital providers. LFCF subtracts interest and debt repayments, leaving only what belongs to equity holders.
- Why is D&A added back?
- Depreciation and amortization are non-cash expenses that reduce net income on paper but do not reduce the company's cash balance, so they are added back to arrive at cash flow.
- What does a negative LFCF mean?
- A negative LFCF means the business is consuming more cash than it generates after debt service — often acceptable for fast-growing companies that invest heavily in expansion.
Frequently asked questions
- What is the difference between levered and unlevered free cash flow?
- Unlevered FCF (UFCF) measures cash flow before debt service and is used to value the entire enterprise. Levered FCF (LFCF) is after all debt obligations and represents cash available to equity holders only.
- Why might LFCF differ significantly from net income?
- Because net income includes non-cash charges like depreciation and amortization (added back) but excludes cash uses like CapEx and debt repayments. A company can be profitable on paper but cash-negative after CapEx and debt service.
- Is negative LFCF always a bad sign?
- Not necessarily. High-growth companies often show negative LFCF for years because they invest heavily in CapEx and carry debt to fund expansion. The key question is whether those investments are generating returns above the cost of capital.