Free cash flow (FCF) calculator. Compute operating cash flow minus CapEx, FCF yield, and FCF per share. Essential for valuation and dividend sustainability analysis.
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.
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.
Unlevered FCF = EBIT × (1 − Tax Rate) + D&A − CapEx − Δ Working Capital Levered FCF = Net Income + D&A − CapEx − Δ Working Capital FCF Yield = FCF / Market Cap × 100 FCF Margin = FCF / Revenue × 100
Result: Levered FCF: $6,500,000
$8M net income + $2M D&A − $3M CapEx − $0.5M working capital increase = $6.5M levered free cash flow. If market cap is $100M, FCF yield = 6.5% — attractive for a value investment.
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 = 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.
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.
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.
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.
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.
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.
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.
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.