Levered Free Cash Flow Calculator

Background.

A business that borrows has made promises with dates attached. Before its owners can take a dividend, buy back shares or fund a new project from their own cash, the loan instalment due this quarter has to be paid, whatever kind of year it has been. Levered free cash flow is what is left once those promises, and the spending needed to keep the business running, have been covered: the cash the owners genuinely get to decide about.

The arithmetic starts from operating cash flow, the first subtotal on the cash flow statement. Under US accounting rules, interest paid and income taxes are already inside that figure, so the cost of carrying the debt is out before you begin. Two deductions follow: capital expenditure, the cash spent on equipment, buildings and other long-lived assets, and the principal repayments the loan agreements require during the period.

That last deduction is what separates this measure from plain free cash flow. Two companies with identical operations and identical capex show the same free cash flow, yet very different levered free cash flow if one carries an amortising term loan and the other owes nothing. That is why lenders, buyout investors and anyone judging whether a dividend can be sustained care about it more than about reported earnings.

The definition here is deliberately narrow. Only mandatory repayments are subtracted, not voluntary prepayments or a credit line paid down because cash happened to be spare. Nothing is added for new borrowing, acquisitions are not deducted, and no minimum cash balance is held back. A negative answer means operations did not cover reinvestment and required debt service, so the gap had to be filled from cash reserves, fresh borrowing or new equity.

What is levered free cash flow calculator?

Levered free cash flow is the cash a business generates in a period after paying its operating costs, interest and taxes, investing in fixed assets, and making the debt principal repayments it is contractually obliged to make. It is called levered because it reflects the company's borrowing: the cost of debt has been paid by the time the figure is struck. On this page it is a single dollar amount for whatever period your inputs cover, positive when the business funded everything itself and negative when it fell short.

How to use this calculator.

1. 01Enter operating cash flow from the cash flow statement, the line usually called net cash provided by operating activities. If the company reports under IFRS and shows interest paid in the financing section instead, subtract that interest first, because the formula assumes it is already out.
2. 02Enter capital expenditure as a positive number even though the statement prints it in brackets. It normally appears in the investing section as purchases of property, plant and equipment.
3. 03For mandatory debt principal, use the scheduled repayments due in the period: the maturity table in the debt note, or the current portion of long-term debt when you are looking a year ahead. Leave out voluntary prepayments and revolving-credit paydowns.
4. 04Keep all three figures to the same period, whether a quarter, a fiscal year or the trailing twelve months, and read the result as cash for that same period.

The formula.

Levered FCF = OCF − CapEx − P, where OCF is operating cash flow, CapEx is capital expenditure and P is the principal the debt agreements require to be repaid in the period. All three are cash amounts over the same period, and the two subtractions are the whole model: there is no tax rate, discount rate or growth assumption anywhere in it. Interest has no separate term because US GAAP already deducts it inside operating cash flow; taking it off again would count the cost of debt twice. Operating cash flow may be negative, while capex and principal are entered as positive outflows. Every term carries a weight of one, so the result moves dollar for dollar with each input. The input most likely to swing it from year to year is principal, since a loan ending in a large balloon payment can absorb a whole year of otherwise healthy cash generation.

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.