Free Cash Flow To Firm Calculator

Background.

Profit and cash part company in a growing business. A firm can report healthy operating earnings while its bank balance shrinks, because the earnings are being spent on new equipment, on stock sitting in a warehouse and on invoices customers have not yet paid. Free cash flow to the firm, or FCFF, measures what is left after all of that: the cash the operations generate after tax and after the reinvestment needed to keep them running and growing, available to every provider of capital, lenders and shareholders alike.

That last phrase is the point. FCFF is measured before any interest is paid or any debt is raised or repaid, which is why it is also called unlevered free cash flow. Two companies with identical plants and sales but very different borrowing show the same FCFF, so it is the cash flow analysts discount at the weighted average cost of capital to value a whole business, before subtracting net debt to reach the value of the shares.

The route here starts from EBIT, earnings before interest and taxes. Tax is charged on EBIT at the rate you enter, as though the company had no debt, giving net operating profit after tax (NOPAT). Depreciation and amortization are added back because they reduce profit without spending cash. Capital expenditure is subtracted because it spends cash without immediately reducing profit, and so is any increase in operating working capital.

A negative FCFF is not automatically bad news. A company building capacity ahead of demand can spend more than it earns for years; the question is whether that reinvestment later pays off. A mature business that keeps showing negative FCFF is another matter.

The result is only as good as what goes in. One-off items buried in EBIT, cash acquisitions and an unusually heavy capex year are not smoothed out, so normalize them first if the figure will feed a valuation.

What is free cash flow to firm calculator?

Free cash flow to the firm is the cash a company's operations produce in a period after paying tax on operating profit and after funding capital spending and working capital, but before any payment to lenders or shareholders. It belongs to all capital providers together. Here it is EBIT × (1 − tax rate) + depreciation and amortization − capital expenditure − increase in operating working capital, in the currency and period of the inputs.

How to use this calculator.

1. 01Enter EBIT (operating income) from the income statement for one period — a year or a quarter — and make sure every other input covers the same span. Remove one-off gains or charges if you want a sustainable figure.
2. 02Enter the marginal tax rate on operating profit as a percentage. For valuation work the statutory rate, combined with state or local taxes where they apply, is the usual choice; the tax line actually reported is distorted by interest deductions.
3. 03Enter depreciation and amortization from the cash flow statement, where it appears as an add-back, and capital expenditure, usually labelled purchases of property, plant and equipment. Enter capex as a positive number even though the statement shows it in brackets.
4. 04Enter the increase in operating working capital: the rise in receivables and inventory less the rise in payables. The cash flow statement shows this change with the opposite sign, so a (10,000) line there goes in as 10,000 here, and a release of cash goes in as a negative number.
5. 05Read FCFF alongside NOPAT, which shows how much of the result comes from after-tax profit before the reinvestment adjustments.

The formula.

FCFF = EBIT × (1 − T) + D&A − CapEx − ΔWC. The first term, EBIT × (1 − T), is NOPAT: operating profit after the tax it would bear if the company had no debt. Interest is deliberately left out. When FCFF is used for valuation, the tax saving on interest is already captured in the after-tax cost of debt inside the discount rate, and counting it here as well would count it twice. D&A is added back because it is an accounting charge, not a payment. CapEx is cash spent on long-lived assets, and ΔWC is the change in receivables plus inventory minus payables, positive when growth ties up cash. In most companies the reinvestment terms, not the tax rate, decide whether FCFF is large or small. One simplification matters for loss-makers: a negative EBIT is also multiplied by (1 − T), so an operating loss of $100,000 at 25% becomes a NOPAT of −$75,000. That assumes the loss earns an immediate tax credit, which many loss-making companies cannot actually use.

A worked example.

Frequently asked questions.

References& sources.

1. [1]OpenStax, Rice University. Principles of Finance, 2022. Chapters 6–10. Retrieved 2026-08-06.
2. [2]U.S. Internal Revenue Service. Tax guidance current 2026. Official forms, instructions and tax topics. Retrieved 2026-08-06.
3. [3]U.S. Securities and Exchange Commission. Investor.gov current 2026. Investment products and risk. Retrieved 2026-08-06.