Free Cash Flow Calculator

About the Free Cash Flow Calculator

Free Cash Flow is the cash a business generates after accounting for capital expenditures. It's the money available to pay dividends, buy back shares, reduce debt, or reinvest in growth.

FCF = Operating Cash Flow − Capital Expenditures. Unlevered FCF (before debt payments) is used for enterprise valuation, while levered FCF (after debt) shows what's available to equity holders.

This calculator computes both levered and unlevered FCF, FCF yield, FCF margin, and FCF per share — key metrics for investors and financial analysts. Free cash flow strips away the accounting adjustments that obscure true earnings, giving investors and managers a clear view of how much cash a business actually generates after maintaining and reinvesting in its operations. Unlike net income, FCF cannot be easily manufactured through creative accounting practices. This transparency makes FCF the preferred valuation metric for analysts building discounted cash flow models and for leaders planning capital allocation.

When This Page Helps

Earnings can be manipulated through accounting choices, but cash flow is harder to fake. FCF is the ultimate measure of a company's financial health because it shows actual cash generation. Investors use FCF yield to compare companies, and DCF models depend on accurate FCF projections. It is also the basis for sustainable dividend policies and share buyback programs.

How to Use the Inputs

1. Enter net income or EBIT.
2. Add back depreciation and amortization.
3. Enter changes in working capital.
4. Enter capital expenditures (CapEx).
5. Optionally enter interest, taxes, shares, and market cap for yield calculations.
6. View unlevered FCF, levered FCF, and key ratios.

Example Calculation

Tips & Best Practices

• Positive and growing FCF is the strongest sign of financial health.
• Compare FCF to net income — if net income is high but FCF is low, check for large CapEx or working capital drain.
• FCF yield above 5-8% is typically attractive; below 2% may indicate an overvalued stock.
• Negative FCF isn't always bad — high-growth companies invest heavily in CapEx to expand.
• Use unlevered FCF for enterprise valuation (DCF) and levered FCF for equity valuation.
• Track FCF margin over time — expanding margins indicate improving capital efficiency.

FCF vs EBITDA

EBITDA ignores CapEx, working capital changes, and taxes — all real cash costs. FCF accounts for them. EBITDA is useful for comparing operating performance, but FCF is the true measure of cash available for distribution. Never confuse the two.

FCF Conversion Rate

FCF conversion = FCF / Net Income. A ratio above 1.0 means the company converts more of its earnings into cash than accounting suggests (often due to D&A exceeding CapEx). Below 0.5 is a red flag: earnings aren't translating to cash.

Capital Allocation

Once FCF is positive, management must decide how to allocate it: dividends (return cash now), buybacks (return cash via fewer shares), debt reduction (lower risk), M&A (grow externally), or reinvestment (grow organically). The best companies excel at capital allocation.

Frequently Asked Questions

• What is the difference between levered and unlevered FCF?

  Unlevered FCF is cash flow before any debt payments (interest and principal). It represents cash available to all capital providers. Levered FCF is after debt payments — cash available only to equity holders. Use unlevered for DCF enterprise valuation, levered for equity analysis.

• Why is FCF more important than net income?

  Net income includes non-cash items (depreciation, stock-based compensation, deferred revenue) and can be managed through accounting choices. FCF shows actual cash generated. Companies have gone bankrupt while reporting positive net income because cash flow was negative.

• What is a good FCF yield?

  It varies by sector. For the S&P 500, the average FCF yield is ~4-5%. Above 8% suggests potential undervaluation (or risk). Below 2% suggests overvaluation or heavy investment. Compare within your industry, not across all sectors.

• How does working capital affect FCF?

  Increases in working capital (more inventory, more receivables, less payables) consume cash and reduce FCF. Decreases in working capital free up cash. Fast-growing companies often see working capital increases that temporarily depress FCF despite strong earnings.

• Can FCF be negative?

  Yes, and it's common for companies investing heavily in growth (building factories, expanding warehouses, hiring). Amazon had negative FCF for years while investing in infrastructure. The key is whether the investment will generate returns that justify the negative cash flow.

• How is FCF used in DCF valuation?

  In a DCF model, you project unlevered FCF for 5-10 years, discount each year's FCF back to present value using WACC, add a terminal value, and sum everything to get enterprise value. Subtract net debt to get equity value. Our DCF calculator automates this.