Free Cash Flow Calculator
From operating cash flow minus capital expenditure, compute the free cash flow a company can use freely.
Input Data
Results
At a glance:Free Cash Flow (FCF) = operating cash flow − capital expenditure. OCF is cash from core operations; CapEx is spending on long-term assets to sustain/grow the business. After deducting 'the money you must spend to keep earning', the remaining FCF is the cash freely usable for dividends, buybacks, debt repayment or M&A. Unlike net income (with depreciation, accruals), FCF is cash-based and better shows real cash generation — the core input to DCF valuation. Positive FCF = surplus; long-term negative may need external funding, but temporary negative in expansion is normal.
Formula
FCF = operating cash flow − capital expenditure.
$$\text{FCF} = \text{Operating Cash Flow} - \text{Capital Expenditures}$$$$\text{FCF Yield} = \dfrac{\text{FCF}}{\text{Market Cap}} \times 100\%$$How to Use
- Enter operating cash flow from the cash flow statement.
- Enter capital expenditure for the period.
- View the free cash flow.
FCF at operating cash flow HK$800,000 and different CapEx
| Operating cash flow | CapEx | FCF |
|---|---|---|
| HK$800,000 | HK$0 | HK$800,000 |
| HK$800,000 | HK$200,000 | HK$600,000 |
| HK$800,000 | HK$300,000 | HK$500,000 |
| HK$800,000 | HK$500,000 | HK$300,000 |
| HK$800,000 | HK$800,000 | HK$0 |
At fixed OCF, the larger the CapEx (expansion investment), the less free cash, down to zero. Read trend with investment payback.
Case Studies
Case 1: Mature firm pays dividends and cuts debt from FCF
A stable utility: operating cash flow HK$800,000, maintenance CapEx only HK$200,000. FCF = 800,000 − 200,000 = HK$600,000.
This HK$600,000 is freely allocatable — dividends, buybacks or early loan repayment. High FCF, low reinvestment need is the profile of stable dividend stocks, because the cash truly lands.
Case 2: Expansion FCF turning negative is not necessarily bad
A restaurant chain expanding: operating cash flow HK$800,000 (healthy) but fit-out and equipment CapEx HK$1,000,000 → FCF = 800,000 − 1,000,000 = −HK$200,000.
Negative FCF looks bad alone, but it is active growth investment — if new stores later return enough OCF, temporary negative is reasonable.
Interpretation: distinguish 'weak core cash generation' negative FCF from 'active expansion' negative FCF; watch whether FCF turns positive after expansion completes.
FAQ
FCF vs net income?
Net income is accounting profit with non-cash items (depreciation, accruals); FCF is cash-based and further deducts CapEx. A profitable firm with heavy CapEx or slow receivables can still have negative FCF. For cash-generation ability, FCF usually tells the truer story.
Is negative FCF always bad?
Not necessarily. Fast-expanding firms often show temporary negative FCF from big Capex (new capacity, stores); if it pays back later, that is healthy growth spending. But a mature firm with long-term negative FCF needing constant borrowing or issuance warrants caution on sustainability.
How is FCF used?
Positive FCF is the cash management can freely allocate — dividends, buybacks, debt repayment, M&A. Investors use FCF for dividend capacity and valuation (DCF); management uses it for capital allocation.
Levered vs unlevered FCF?
Unlevered FCF (FCFF) is before interest, for all capital providers (equity + debt), used in firm valuation; levered FCF (FCFE) is after interest and net debt repayment, truly for shareholders. This calculator uses the basic 'OCF − CapEx'; for DCF pick the version matching your purpose (FCFF with WACC, FCFE with cost of equity).
Where to find CapEx and OCF for HK-listed firms?
HK-listed firms file annual/interim reports under HKFRS on HKEX; the consolidated cash flow statement shows operating cash flow and investing-activity items like 'purchase of property, plant and equipment' (CapEx). Subtract to get FCF; IFEC also has educational material on reading reports.
Related Tools
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.