Free Cash Flow to Firm (FCFF) Excel Model

Free Cash Flow to Firm (FCFF) three different ways to calculate

by Fin-Wiser Advisory
Financial & Operational Advisory SpecialistFollow 69

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Description
Free cash flow to the firm (FCFF) represents the amount of cash flow from operations available for distribution after depreciation expenses, taxes, working capital, and investments are accounted for and paid. FCFF is essentially a measurement of a company's profitability after all expenses and reinvestments. It is one of the many benchmarks used to compare and analyze a firm's financial health.

1. Free cash flow to the firm (FCFF) represents the cash flows from operations available for distribution after depreciation expenses, taxes, working capital, and investments are accounted for.
2. Free cash flow is arguably the most important financial indicator of a company's stock value.
3. A positive FCFF value indicates that the firm has cash remaining after expenses.
4. A negative value indicates that the firm has not generated enough revenue to cover its costs and investment activities.

Fin-wiser's FCFF Analysis helps user to understand on how to calculate FCFF from three different methodology:

1. Method 1 uses EBIT as a base and the adjust for other components from Income statement and cash flow. This is the most popular method and can be used on companies which report the three statements i.e. Income Statement, Balance Sheet and cash flow.

2. Method 2 is calculation of FCFF using the cash flow statement. This is most popular with private or small scale companies which doesn't maintain proper financial statements and depends upon cash statement.

3. Method 3 is from Profit After Tax and is similar to method 1 in terms of requirement.

This Best Practice includes
1 Excel file