Free cash flow (FCF) is a measure of a company’s financial performance. It represents the cash that a company is able to generate after spending necessary funds to maintain or grow its asset base. FCF is an important measure because it helps show the amount available to a company to pursue business enhancing opportunities. It is calculated as:FCF = EBIT x (1 – tax rate) + depreciation + amortization – (change in net working capital) – (capital expenditure). Assume a company has a $250,000 EBIT and has $50,000 in capital expenditures. Changes in net working capital were $30,000. Depreciation is $20,000 and amortization is $10,000. The current tax rate of the company is 30%. The FCF is:FCF = $250,000 x 70% + $20,000 + $10,000 – $30,000 – $50,000 = $125,000
2016-12-14 00:00:002016-12-14 00:00:00https://quickbooks.intuit.com/ca/resources/finance-accounting/regularly-calculate-free-cash-flow/Finance and AccountingEnglishLearn what free cash flow is, why it is important to measure regularly, how to calculate it, and see an example calculation.https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/shop-ownre-calculates-business-free-cash-flow.jpghttps://quickbooks.intuit.com/ca/resources/finance-accounting/regularly-calculate-free-cash-flow/Accounting Tip: Regularly Calculate Your Business's Free Cash Flow
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