The formula
How to calculate free cash flow
Free cash flow is the cash a business generates after paying for the assets it needs to keep operating. It is the money genuinely available for dividends, buybacks, debt repayment or acquisitions — and it is much harder to massage than profit.
Both figures come straight from the cash flow statement. Some analysts subtract only maintenance capex, on the grounds that growth capex is discretionary; that is more informative but requires a judgement the accounts do not make for you.
What to enter:
- Operating cash flow
- Capital expenditure — purchases of property, plant and equipment from the cash flow statement
- Revenue
No submit button: type and the answer moves. Your inputs end up in the link, so the page can be shared already filled in.
The order the fields are filled in makes no difference to the result — the calculator recomputes the whole formula from whatever is currently in every field, not step by step. That means it is safe to adjust one number, watch the result change, and adjust it back, without worrying about resetting anything first.
Why free cash flow matters
A calculation like this usually gets used at a decision point rather than out of curiosity — comparing two real options, checking a number a lender or adviser has quoted, or working out whether a plan that sounded fine in conversation still holds up once it is written down with actual figures. The maths itself is rarely complicated; what is hard is remembering which figures to use and in what order, which is exactly what a dedicated calculator is for.
Beyond a one-off check, the same calculation is worth revisiting whenever the underlying numbers change — a new interest rate, a change in income, a different term. Because the figures live in the page's own web address, coming back to update just one field and compare the new result against the old one takes seconds rather than starting again from a blank page.
The reason a page like this exists at all, rather than leaving the calculation to a spreadsheet or a textbook appendix, is that the formula behind free cash flow is fiddly enough to get wrong by hand but not complicated enough to need specialist software. That middle ground — real enough maths to matter, simple enough to check instantly — is exactly what a dedicated calculator is for, and it is why the same figure recalculated here should match a careful manual calculation almost exactly.
A calculator like this one is often bookmarked and returned to repeatedly over months rather than used once, particularly for anything tied to an ongoing plan such as a mortgage, a savings goal or an investment being tracked. Because the figures live in the web address rather than only in memory, coming back to the same page with updated numbers is quicker than starting from a blank spreadsheet each time.
Worked example
Work through the defaults on this page:
- Operating cash flow: 92,000,000
- Capital expenditure: 34,000,000
- Revenue: 480,000,000
That gives:
- Free cash flow: 58,000,000
- Free cash flow margin: 12.08 %
- Capex as a share of operating cash flow: 36.96 %
These figures are only the calculator's own starting values, included so the working is visible rather than hidden inside the tool above. Replace them with your own numbers and the same arithmetic applies — nothing about the method changes, only the inputs feeding it.
Reading the result
The margin is the comparable figure across companies. Software businesses routinely convert 20–30% of revenue into free cash flow; retailers and manufacturers with heavy asset bases operate in low single digits, and that is normal rather than a warning.
Where this goes wrong. Reading a single year. Capex is lumpy — a new factory can wipe out free cash flow in the year it is built while improving the business permanently. Average three to five years before drawing conclusions.
A useful check on any unfamiliar result is to compare it against a rough mental estimate first — round the inputs to convenient numbers and see whether the calculator's answer lands in roughly the same territory. A wildly different figure usually means one of the fields was entered in the wrong unit, most often a percentage typed as a whole number where a decimal was expected, or the reverse.
Profit includes non-cash charges like depreciation and depends on judgements about revenue timing. Free cash flow tracks money actually moving, which makes it harder to flatter and closer to what pays a dividend.
Yes, and routinely so for a fast-growing one investing ahead of revenue. The question is whether the spending is building something that earns a return, and whether the funding to reach that point is secured.
The answer it gives you is free cash flow. With 92,000,000 operating cash flow, 34,000,000 capital expenditure and 480,000,000 revenue, that comes to 58,000,000. Change any field and the figure moves with it.
Whenever one of the underlying figures changes — a new interest rate, a different balance, an updated term — since the result only reflects what is currently in the fields. There is no need to keep a separate record of past results; the web address for a filled-in version already carries the figures used to produce it.
Not unless a tax rate or a fee is explicitly one of the inputs above. Where it is not, the figure shown is a gross calculation, and any tax due depends on your personal circumstances and current tax rules, which are worth checking separately.
The arithmetic itself is exact — the calculator applies the formula shown above precisely, with no rounding until the final figure is displayed. The uncertainty, where it exists, is entirely in the inputs: an estimated rate or an approximate balance carries that same approximation through to the result.