CF LAB

Free cash flow to the firm

FCFF

For learning purposes only. Do not use this calculator or its data to make investment decisions. The company and its figures are made up for teaching.

What is this?

Free cash flow to the firm (FCFF) is the cash a company’s operations produce after paying tax and after investing in the assets it needs to keep going and grow. It is the cash available to everyone who funds the company, lenders and shareholders together, which is why it is worked out before interest. It is the cash flow you discount at the WACC to value a company.

Choose Show the working to see each step, or Practise step by step to work it out yourself and get feedback on each answer.

How it works

Start from the income statement and two balance sheets on the left (PKR millions). You can change any figure.
FCFF = EBIT × (1 − t) + depreciation − capital spending − increase in working capital.
The chart walks from operating profit down to FCFF: green adds cash, red uses it.
● marks the balance-sheet lines that count as operating working capital; ○ lines (cash, short-term debt) do not.

Chart ↓

How to use it

Mode

Show the working: every step is worked out for you. Practise: the answers are hidden until you try each step.

Margalla Foods Ltd is a made-up company. All figures are in PKR millions. Change any of them to make your own question.

Income statement, this year
RevenueSales for the year
Cost of goods soldCost of what was sold
Operating expensesSelling, admin and other running costs
DepreciationWear and tear on fixed assets: a cost, but not a cash payment
EBIT (operating profit)
Interest expensePaid to lenders
Profit before tax
Tax rate (%)Marginal corporate rate
Tax
Net income

Balance sheets (only the lines FCFF needs)
	Last year	This year
CashNot operating working capital
Accounts receivableOwed by customers
InventoryStock on hand
Net fixed assetsProperty, plant and equipment after depreciation
Accounts payableOwed to suppliers
Accrued expensesWages, utilities etc. owed
Short-term bank loansFinancing, not operating

● operating working capital ○ left out of working capital (cash and borrowing belong to financing)

Tip: type over any figure. Reset returns to the original example.

Free cash flow to the firm

NOPAT

Net reinvestment

What this means

Try this

How it’s calculated