Free Cash Flow to Firm (FCFF) Calculator
Calculate FCFF from EBIT, tax rate, non‑cash charges, CapEx, and working capital to support valuation and capital budgeting work.
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Data Source and Methodology
All calculations are based on standard corporate finance methodologies as outlined in authoritative texts such as "Principles of Corporate Finance" by Brealey, Myers, and Allen.
The Formula Explained
Glossary of Variables
- EBIT
- Earnings Before Interest and Taxes
- Tax Rate (%)
- The corporate tax rate applicable
- Depreciation
- Non-cash expense for the allocation of the cost of tangible assets
- Capital Expenditures (CapEx)
- Funds used by a company to acquire or upgrade physical assets
- Changes in Working Capital
- Difference between current assets and current liabilities over a period
How It Works: A Step-by-Step Example
For example, if a firm has an EBIT of $200,000, a tax rate of 30%, depreciation of $25,000, CapEx of $50,000, and an increase in working capital of $10,000, the FCFF would be calculated as follows...
Frequently Asked Questions (FAQ)
What is Free Cash Flow to Firm (FCFF)?
FCFF is a measure of a company's financial performance that shows how much cash the business generates after accounting for capital expenditures.
Why is FCFF important?
It is important for assessing a company's ability to generate cash that can be distributed to investors in the form of dividends or share buybacks.
How is FCFF different from Free Cash Flow to Equity (FCFE)?
FCFF is the cash available to all investors, both debt and equity holders, while FCFE is the cash available to equity holders only.
Can FCFF be negative?
Yes, a negative FCFF indicates that a company is investing more in its operations than it is generating in cash from its operations.
How does depreciation affect FCFF?
Depreciation is added back to EBIT in the FCFF formula because it is a non-cash expense.
Formula (LaTeX) + variables + units
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FCFF = EBIT \times (1 - \text{Tax Rate}) + \text{Depreciation} - \text{CapEx} - \text{Changes in NWC}
\[ FCFF = EBIT \times (1 - \text{Tax Rate}) + \text{Depreciation} - \text{CapEx} - \text{Changes in NWC} \]
- T = property tax (annual or monthly depending on input) (currency)
- NIST — Weights and measures — nist.gov · Accessed 2026-01-19
https://www.nist.gov/pml/weights-and-measures - FTC — Consumer advice — consumer.ftc.gov · Accessed 2026-01-19
https://consumer.ftc.gov/
Last code update: 2026-01-19
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