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Free Cash Flow from Net CFO

June 10, 2012
  • Free Cash Flow = Net Cash Flows from Operating Activities – Dividends – (Purchase of Plant Assets – Sales of Plant Assets)
  1. The keyword here is “net” interest has already been added back at this point. The CFA Institute is now giving a definition of Free Cash Flow as:

    FCFF = CFO + (Int * (1 – tax rate)) – Net Capital Expenditures

    A longer form is:

    FCFF = NI + NCC + Int(1-Tax rate) – FCInv – WCInv

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  1. 30 CFA Questions you should be able to answer – Muskblog

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