— Business & Valuation
Free Cash Flow Calculator
Calculate free cash flow to the firm and to equity from EBIT, EBITDA, net income, or cash from operations. Walk through taxes, working capital, capex, debt flows, and growth projections for valuation.
FCFF — free cash flow to the firm
$93
- FCFE — free cash flow to equity
- $83
- FCF margin
- 15.42%
- Reinvestment (Capex + ΔNWC)
- $60
Try: FCFF from EBIT, From net income, From cash from ops, 5-year projection
— The build, line by line
| Line item | Amount |
|---|---|
| EBIT | $150 |
| Income tax @ 25% | $-38 |
| Depreciation & amortization | $40 |
| Capital expenditure | $-50 |
| Increase in net working capital | $-10 |
| FCFF — free cash flow to the firm | $93 |
| Less after-tax interest | $-15 |
| Net borrowing (debt raised) | $5 |
| FCFE — free cash flow to equity | $83 |
— The multi-year FCF projection (8% growth) — exports to a DCF
| Year | EBIT | D&A | Capex | ΔNWC | FCFF | FCFE | FCF margin |
|---|---|---|---|---|---|---|---|
| Year 1 | $150 | $40 | $50 | $10 | $93 | $83 | 15.42% |
| Year 2 | $162 | $43 | $54 | $11 | $100 | $89 | 15.42% |
| Year 3 | $175 | $47 | $58 | $12 | $108 | $96 | 15.42% |
| Year 4 | $189 | $50 | $63 | $13 | $117 | $104 | 15.42% |
| Year 5 | $204 | $54 | $68 | $14 | $126 | $112 | 15.42% |
— From profit to free cash
Download— How it works
FCFF = EBIT·(1 − tax) + D&A − Capex − ΔNWC. FCFE = FCFF − Interest·(1 − tax) + Net borrowing. From net income: FCFE = Net income + D&A − Capex − ΔNWC + Net borrowing. FCF margin = FCFF ÷ revenue.
FCFF, FCFE, and why the starting point doesn’t matter
There are two free cash flow figures, and they answer different questions. FCFF — free cash flow to the firm — is the cash available to everyone who funded the business, debt and equity alike, before any financing flows; it’s computed before interest and is what an enterprise-level DCF discounts. FCFE — free cash flow to equity — is what remains for shareholders after debt has been serviced and borrowing netted; it’s what can fund dividends and buybacks. The reassuring part is that you can reach the same FCFF from whatever number you happen to have: EBIT, EBITDA, net income or cash from operations all walk to the identical answer once you add back the right non-cash items and adjust for financing. This calculator shows that walk line by line, because the bridge — not just the final number — is what tells you whether the cash flow is real.
Worked example — EBIT 150, tax 25%, D&A 40, Capex 50, ΔNWC 10: FCFF = 150 × (1 − 0.25) + 40 − 50 − 10 = 112.5 + 40 − 60 = 92.5. With interest 20 and net borrowing 5: FCFE = 92.5 − 20×0.75 + 5 = 92.5 − 15 + 5 = 82.5.
The adjustments that actually move the number
Beyond the core bridge, a few items deserve care. Working capital is the quiet one: a fast-growing company can be profitable yet cash-poor because every extra sale ties up cash in receivables and inventory — build ΔNWC from its components to see it clearly. Stock-based compensation is the contested one: it’s a non-cash charge, so it’s often added back like depreciation, but it’s a genuine cost to shareholders through dilution, so conservative analysts refuse to — the calculator lets you choose, and the choice can swing the valuation of a tech company materially. And under IFRS 16, capitalised operating leases inflate EBITDA, so an EBITDA-based FCFF can overstate the cash unless you subtract lease repayments. None of these has a single right answer; the point is to make them explicit rather than buried.
Projecting FCF for a DCF
A valuation needs not one year of free cash flow but a forecast of it. Set the forecast horizon above one year and the calculator projects every line item forward at your growth rate, producing the full FCFF (and FCFE) series — the exact input a discounted-cash-flow model discounts back to today, and the terminal value extends beyond. The projection here grows every driver at a single constant rate, which keeps it simple and the margin steady; a real model would grow revenue and let capex, depreciation and working capital move at their own rates as the business matures. Treat the series as a clean starting scaffold to refine, then hand it to the DCF, terminal value and WACC calculators to finish the valuation. Educational tool only — not investment advice.
— Reader questions
What is the difference between FCFF and FCFE?
FCFF (free cash flow to the firm) is the cash available to all providers of capital — debt and equity — before financing flows; it’s computed before interest and is discounted in an enterprise-level DCF. FCFE (free cash flow to equity) is what’s left for shareholders after interest and net borrowing, and it’s what funds dividends and buybacks. FCFE = FCFF − after-tax interest + net borrowing.
How do you calculate free cash flow from EBITDA?
Start from EBITDA, subtract the cash taxes (the tax on EBIT, i.e. EBITDA minus D&A), then subtract capital expenditure and the increase in net working capital. Because EBITDA already includes depreciation, you don’t add D&A back again — which is why the EBITDA route reaches the same FCFF as the EBIT route.
Should stock-based compensation be added back to free cash flow?
It’s genuinely debated. SBC is a non-cash expense, so the standard cash-flow statement adds it back — which inflates free cash flow. But it’s a real cost to shareholders through dilution, so many analysts decline to add it back, treating it as an economic expense. For companies that pay heavily in stock, the choice can change the valuation significantly, so make it deliberately.
Why subtract the change in working capital?
Because growth consumes cash before it shows up as profit. When receivables or inventory rise, cash is tied up even though the sale is booked; when payables rise, cash is freed. The net change in working capital is therefore a real cash flow — subtracted when it increases, added back when it decreases — and it’s why a profitable, fast-growing company can still be short of cash.
Which free cash flow does a DCF use?
It depends on the DCF type. An enterprise (firm) DCF discounts FCFF at the WACC to get enterprise value, then subtracts net debt for equity value. An equity DCF discounts FCFE at the cost of equity to get equity value directly. FCFF with WACC is the more common approach because it’s less sensitive to changes in capital structure.