Free Cash Flow

From Financial Literacy Wiki

Free cash flow is an indication of an entity's solvency as well as its ability to pay dividends or expand operations. It is the excess cash generated after expenses to maintain current productive capacity. The formula is as below

Element	Data Source
EBIT x (1-Tax)	Current Income Statement
+ Depreciation/Amortization	Current Income Statement
- Changes in Working Capital	Prior & Current Balance Sheets: Current Assets and Liability accounts
- Capital expenditure	Prior & Current Balance Sheets: Property, Plant and Equipment accounts
= Free Cash Flow