Free Cash Flow Formula | Top 3 FCFF Formula You Must Know!

In this video, we discuss the Top 3 FCFF formula (Free Cash Flow to firm formula) - 1) Starts with EBIT 2) Starts with Net Income 3) Starts with EBITDA

Below are the top 3 Free cash flow formulas from Investment Banking point of view.

1) FCFF FORMULA STARTING WITH EBIT
Free Cash Flow to Firm or FCFF = EBIT x (1-tax rate) + Non Cash Charges + Changes in Working capital – Capital Expenditure

2) FCFF FORMULA STARTING WITH NET INCOME
Net Income + Depreciation & amortization + Interest x (1-tax) + changes in Working Capital – Capital Expenditure

3) FCFF FORMULA STARTING WITH EBITDA
EBITDA x (1-tax rate) + (Dep & Amortization) x tax rate + changes in Working Capital – Capital Expenditure

All 3 FCFF formula have the same results.

My personal favorite is the Free Cash Flow Formula that starts with EBIT. The primary reason is when we do financial modeling, it is easier to forecast and normalize EBIT and take the relevant EBIT into the calculations.

For more details, please refer to https://www.wallstreetmojo.com/free-c...

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