Free Cash Flow to Firm (FCFF) Calculator: Evaluate Business Financial Health

Use the FCFF calculator by entering EBIT, tax rate, depreciation & amortization, capital expenditure, and the change in working capital; the tool returns cash flow available to all investors. Global listed companies post a median FCFF margin of 6 % (S&P Capital IQ, 2023).

Free Cash Flow to Firm (FCFF) Calculator

Enter Earnings Before Interest and Taxes (e.g., 1000000)

Enter Tax Rate as a percentage (e.g., 25 for 25%)

Enter Depreciation and Amortization amount (e.g., 500000)

Enter Capital Expenditure amount (e.g., 300000)

Enter Change in Working Capital amount (e.g., 100000)

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How to use the tool

  1. EBIT – type operating profit before interest and tax.
    Examples: 1 800 000, 3 250 000.
  2. Tax Rate (%) – input the effective corporate tax rate.
    Examples: 18.5, 27.
  3. Depreciation & Amortization – add non-cash charges for the period.
    Examples: 250 000, 540 000.
  4. Capital Expenditure – enter cash spent on long-term assets.
    Examples: 420 000, 900 000.
  5. Change in Working Capital – provide the net variation in current assets minus current liabilities.
    Examples: 95 000, 140 000.
  6. Press Calculate FCFF; the result appears instantly.

Formula used

$$\text{FCFF}=EBIT\; rac{}{ }(1-\text{Tax Rate})+D\!&\!A-\text{CapEx}-\Delta WC$$

Example calculation

  • EBIT = 2 000 000
  • Tax Rate = 25 % → 0.25
  • D&A = 300 000
  • CapEx = 450 000
  • ΔWC = 120 000

$$\begin{aligned} \text{FCFF}&=2\,000\,000(1-0.25)+300\,000-450\,000-120\,000\\ &=1\,500\,000+300\,000-450\,000-120\,000\\ &=1\,230\,000 \end{aligned}$$

Quick Facts

  • The average statutory corporate tax rate in OECD nations is 23.6 % (OECD, 2022).
  • Capital expenditures in U.S. S&P 500 firms totalled $895 bn in 2022 (S&P Global, 2023).
  • “FCFF is the preferred metric for valuing levered firms” (Damodaran, 2020).
  • Working-capital swings explain up to 30 % of cash-flow volatility in manufacturing (McKinsey, 2021).

FAQ

What is Free Cash Flow to Firm?

FCFF is cash generated by operations after taxes, capex, and working-capital needs, available to debt and equity investors (Damodaran, 2020).

How does FCFF differ from FCFE?

FCFE subtracts net debt payments, so it measures cash only for shareholders, whereas FCFF ignores capital structure (Corporate Finance Institute, 2023).

When can FCFF turn negative?

Large capex or inventory builds can exceed operating cash, driving FCFF below zero; early-stage tech firms show this pattern (PwC, 2022).

How often should you calculate FCFF?

Analysts compute it quarterly for trend monitoring and annually for valuation models (Koller et al., 2020).

What is a healthy FCFF margin?

Manufacturing peers aim for 5 – 8 % of revenue; software firms average 12 % (S&P Capital IQ, 2023).

How do you forecast FCFF?

Project revenue, margins, capex, and working-capital ratios, then apply the same FCFF formula forward (Damodaran, 2020).

Why use FCFF in DCF valuation?

Discounting FCFF with WACC yields intrinsic enterprise value, neutralising leverage effects (Brealey, Myers & Allen, 2022).

Can lenders rely on FCFF?

Yes; rating agencies use FCFF to gauge debt-service capacity because it reflects pre-interest cash (Moody’s, 2022).

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