From EBIT, tax rate, depreciation and amortization, capital expenditure, and change in working capital, compute the unlevered free cash flow independent of financing structure.
Input Data
Results
At a glance:UFCF is the cash generated by operations before financing, equal to after-tax EBIT plus non-cash charges minus capex and the working-capital change.
Formula
unleveredFreeCashFlow = ebit × (1 − taxRate%) + depreciationAmortization − capitalExpenditures − changeInWorkingCapital
$$\text{UFCF} = \text{EBIT} \times (1 - t) + \text{D\&A} - \text{Capex} - \Delta\text{WC}$$How to Use
- Enter the EBIT and tax rate.
- Enter depreciation/amortization, capital expenditure, and working-capital change.
- Read the unlevered free cash flow.
FAQ
What is the difference between unlevered and levered free cash flow?
UFCF assumes the firm has no debt at all—it starts from EBIT, deducts a notional tax, and ignores interest and financing, reflecting cash generated purely by operations; discounted at WACC it gives the enterprise value. Levered free cash flow (LFCF) takes UFCF, subtracts after-tax interest and adds net borrowing—it is the cash truly belonging to shareholders, discounted at the cost of equity to give the equity value.
Why use EBIT × (1 − tax rate) instead of net profit?
Net profit has already subtracted interest expense, which carries the effect of the capital structure. UFCF aims to measure cash generated 'regardless of financing', so it starts from EBIT (before interest) and multiplies by (1 − tax rate) to get the after-tax operating profit assuming no debt—only then can firms of different leverage be compared directly.
Why is the change in working capital deducted?
An increase in working capital (receivables, inventory less payables) means cash is tied up in the operating cycle—a cash outflow—so it is deducted; if working capital falls (cash released) it is an inflow and should be added back. This calculator treats a working-capital 'increase' as positive (a deduction); if working capital decreased in the period, enter a negative number.
Is UFCF the same as Free Cash Flow to Firm (FCFF)?
They are very close conceptually—both are the cash flow available to all capital providers (shareholders + creditors), discounted at WACC, playing the same role in DCF valuation, and many textbooks use UFCF and FCFF as synonyms. The difference is mainly the starting point and path. This calculator's UFCF starts from EBIT: UFCF = EBIT × (1 − tax rate) + D&A − Capex − ΔWC. The common FCFF formula instead starts from cash flow from operations (which already includes interest effects) and adds back after-tax interest: FCFF = CFO + interest × (1 − tax rate) − Capex. With consistent inputs the two should give the same result; they just enter from different statements—UFCF from the income statement (EBIT), FCFF from the cash-flow statement (CFO). Pick based on the data you have. Either way, keep the numerator (cash flow) and denominator (WACC) consistent: since it is cash for all capital, discount at WACC, not the cost of equity.
What to watch on the tax rate, capex and working-capital change when computing UFCF?
All three are common pitfalls. Tax rate: UFCF uses the 'notional tax' on EBIT at the 'marginal rate'—EBIT × (1 − tax rate)—deliberately assuming no debt and no interest shield, to strip out financing structure so firms of different leverage compare directly. Hong Kong's corporation profits tax is generally 16.5% (the two-tier system is 8.25% on the first HK$2m of assessable profits; practice often uses marginal 16.5% or the effective rate as appropriate). Note this may differ from the tax actually paid, which already accounts for the interest shield. Capex: take the cash outflow of capital expenditure, including purchases and upkeep of long-term assets (plant, equipment, intangibles); a common error is counting only expansion capex and omitting maintenance capex, overstating cash flow—a firm that stops reinvesting looks temporarily high in UFCF but is unsustainable. Change in working capital (ΔWC): the period change in non-cash working capital (receivables + inventory − payables). An 'increase' ties up cash (outflow, deducted; enter positive here); a 'decrease' releases cash (inflow, enter negative). Fast-growing firms often see working capital keep rising and swallow cash—a main cause of 'profitable but cash-poor'. Also, this calculator is a single-period estimate; a real DCF should use multi-period forecasts with a terminal value and WACC. Results are for reference only.
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.