Income Statement Inputs
Model Assumptions
- Single-period, company-level FCFF (not project-level incremental FCF)
- Operating Expenses excludes depreciation (entered separately)
- Depreciation is a non-cash charge added back to derive cash flow
- Tax rate applied to EBIT (not net income — interest excluded for unlevered FCF)
- Negative EBIT assumes tax loss is immediately usable (no carryforward modeling)
- ΔNWC = operating working capital only (excludes cash and interest-bearing debt)
For educational purposes. Not financial advice. Market conventions simplified.
Free Cash Flow Results
1
EBITDA
?
Revenue − COGS − OpEx
$2,000,000
− Depreciation
2
EBIT
?
EBITDA − Depreciation
$1,500,000
× (1 − Tax Rate)
3
NOPAT
?
EBIT × (1 − Tax Rate)
$1,125,000
+ Dep − CapEx − ΔNWC
4
Free Cash Flow (FCFF)
?
NOPAT + Dep − CapEx − ΔNWC
$625,000
5
FCFF Margin
?
FCFF ÷ Revenue
6.25%
Formula Breakdown
FCFF = NOPAT + Depreciation − CapEx − ΔNWC
Where NOPAT = EBIT × (1 − Tax Rate) and EBIT = EBITDA − Depreciation
What This Calculator Does
This calculator computes single-period, company-level FCFF (unlevered free cash flow) from income statement line items. It does not include:
- DCF valuation or terminal value — see DCF Calculator
- Standalone WACC calculation — see WACC Calculator
- NPV analysis or accept/reject rules — see NPV Calculator
- FCFE (free cash flow to equity) or multi-period project cash flows
Frequently Asked Questions
Free cash flow to the firm (FCFF) represents the cash generated by a company's operations after accounting for taxes, reinvestment in working capital, and capital expenditures. It is the cash available to all capital providers — both debt holders and equity holders. FCFF is critical for valuation because it forms the basis of discounted cash flow (DCF) analysis, the most widely used intrinsic valuation method. Unlike accounting earnings, FCF reflects actual cash generation and is harder to manipulate.
EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) is a pre-D&A operating profit proxy — it approximates cash earnings from operations before capital investment decisions. EBIT subtracts depreciation from EBITDA to reflect the cost of using long-lived assets. Neither is true cash flow. Free cash flow to the firm (FCFF) starts from NOPAT (after-tax EBIT), adds back non-cash depreciation, then subtracts actual cash outlays for CapEx and working capital changes — making it the true cash flow available to all investors.
Capital expenditures (CapEx) directly reduce free cash flow dollar-for-dollar. When a company invests in property, plant, and equipment, it consumes cash that would otherwise be available to investors. High-growth companies often have CapEx exceeding depreciation (net investment is positive), reducing FCF. Mature companies may have CapEx roughly equal to depreciation (maintenance CapEx only), preserving more cash flow. Negative FCF from heavy CapEx is not necessarily bad — it may signal investment in future growth capacity.
FCFF is the cash flow available to all capital providers (debt + equity) before interest payments. FCFE is the cash flow available only to equity holders, calculated as FCFF minus interest expense (after tax) plus net borrowing. FCFF is used with WACC to value the entire enterprise; FCFE is used with the cost of equity to value equity directly. This calculator computes FCFF (unlevered free cash flow). For DCF valuation using FCFF, discount at the weighted average cost of capital (WACC).
Disclaimer
This calculator is for educational purposes only. It computes a simplified, single-period free cash flow to the firm (FCFF). Actual company cash flows involve additional complexities including multi-period projections, terminal value assumptions, and detailed working capital analysis. This tool should not be used for investment decisions without professional guidance.
