Free Cash Flow Calculator
Free cash flow and how well profit converts to cash. Persistent conversion below one hundred percent means reported profit is not arriving in the bank, which is worth explaining.
Also called: fcf calculator, cash conversion ratio.
$8,800,000.00 of free cash flow, 10.73% of revenue. Cash conversion is 102.33% of net income, which is healthy: cash is arriving faster than profit is booked.
How this is calculated
Free cash flow is operating cash flow less capital expenditure: what the business generates after the spending needed to keep going. Comparing it to net income gives cash conversion, and a conversion consistently below one hundred percent usually means working capital is absorbing cash as the business grows, or that profits are recognised well before they are collected. Neither is fatal and both need an explanation.
cash generated by operations, less what must be reinvested to keep operating- CFO
- Cash from operations
Method and limits
What it assumes
- All capital expenditure is maintenance and growth combined, which the cash flow statement does not separate.
What it deliberately does not model
- A single year is noisy. Lumpy capital spending distorts one period and evens out over three.
- Growth capex depresses free cash flow while creating value, so a low figure is not automatically bad.
Formula version 1.0.0 · definition 1.0.0 · United States · Report a problem with this calculator
Frequently asked questions
- Why is my profit higher than my cash flow?
- Usually working capital. Growing receivables and inventory absorb cash that the profit and loss account has already recognised as earned.