Free Cash Flow Calculator

Work out free cash flow from net income, depreciation & amortization, the change in net working capital, and capital expenditures — the cash a business has left after funding its own operations and reinvestment.

Quick Facts

Formula
FCF = Net Income + D&A − ΔNWC − CapEx
The standard indirect-method calculation, starting from net income on the income statement.
Why it matters
Cash available after operations and reinvestment
Free cash flow can fund dividends, debt repayment, buybacks, or growth without new financing.

Your Results

Calculated
Free cash flow
-
Operating cash flow minus CapEx
Operating cash flow
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Net income + D&A − change in NWC
FCF margin
-
Free cash flow ÷ revenue
FCF conversion
-
Free cash flow ÷ net income

Ready

Enter net income, D&A, working capital change, CapEx, and revenue, then press Calculate.

How the Free Cash Flow Calculator works

Free cash flow (FCF) is the cash a business generates from its operations after paying for the capital expenditures needed to maintain or grow its assets. It answers a specific question: after everything the business spends to keep running and reinvest in itself, how much cash is genuinely left over? This calculator uses the standard indirect method, which starts from net income and works down to a cash figure.

The formula

For net income NI, depreciation & amortization D&A, the change in net working capital ΔNWC, and capital expenditures CapEx:

Operating cash flow = NI + D&A − ΔNWC

Free cash flow = Operating cash flow − CapEx

Depreciation and amortization are added back because they reduce net income on paper but involve no actual cash leaving the business. The change in net working capital is subtracted because a rising balance of receivables and inventory (net of payables) ties up cash in day-to-day operations; a falling balance releases cash and is added back automatically since the sign flips. Capital expenditures are then subtracted because that cash was spent on long-lived assets rather than being available for other uses.

Worked example

Take net income of $500,000, depreciation & amortization of $80,000, a $30,000 increase in net working capital, and $150,000 of capital expenditures. Operating cash flow is $500,000 + $80,000 − $30,000 = $550,000. Free cash flow is $550,000 − $150,000 = $400,000. Against $5,000,000 of revenue, that is an FCF margin of 8% and an FCF-to-net-income conversion of 80% — for every dollar of accounting profit, 80 cents showed up as spendable cash.

What moves free cash flow most

  • Capital expenditures: capital-intensive businesses (manufacturing, telecom, utilities) often show solid net income but weak free cash flow because so much cash is reinvested in equipment and infrastructure.
  • Working capital swings: fast-growing companies frequently tie up cash in inventory and receivables faster than net income grows, which can make free cash flow lag reported profit even when the business is healthy.
  • Non-cash charges: a company with heavy depreciation (recent large asset purchases) can show free cash flow well above net income, since those charges get added straight back.

Limits of this calculation

This is a computation tool, not investment advice. Real free cash flow figures often include adjustments for stock-based compensation, one-time items, and other non-recurring charges that this simplified formula does not model. Use it to understand the mechanics and to sanity-check figures — for company valuation or investment decisions, cross-check with the actual cash flow statement and consult a qualified professional.

Frequently Asked Questions

What is free cash flow and how is it calculated?
Free cash flow (FCF) is the cash a business generates from operations after the capital expenditures needed to maintain or grow its asset base. This calculator uses the indirect method: FCF = Net Income + Depreciation & Amortization − Change in Net Working Capital − Capital Expenditures. The first three terms convert net income into operating cash flow, and subtracting capex leaves the cash available before any financing activity.
Why add back depreciation and amortization?
Depreciation and amortization reduce net income on the income statement but are non-cash charges — no cash actually leaves the business in that period. Adding them back converts the accounting profit figure into a number closer to actual cash generated.
What does a change in net working capital mean for cash flow?
An increase in net working capital (more cash tied up in receivables and inventory than is freed up by payables) consumes cash, so it is subtracted from net income. A decrease in working capital releases cash, so a negative change in working capital gets added back to free cash flow.
What does negative free cash flow mean?
Negative free cash flow means operating cash flow did not cover capital expenditures for the period. That is not automatically a problem — growth-stage companies often run negative FCF while investing heavily in capacity — but it does mean the shortfall must be funded from debt, equity, or existing cash reserves, and sustained negative FCF is worth investigating.

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