The profit on the books can be high while cash is scarce, or vice versa: to understand how much money a company really generates you need the Free Cash Flow. It is the cash that remains after paying the investments needed to maintain and grow the business, and it is what allows a company to pay down debt, pay dividends or make acquisitions. This calculator determines the FCF, the FCF margin, the capex intensity and the conversion, to judge the true financial health of a company.

What Free Cash Flow is

The Free Cash Flow is the money a company generates from its operations after subtracting the capital expenditures (the investments in fixed assets). Unlike net income, which is an accounting figure influenced by non-monetary items, the FCF is real cash: the one actually available for shareholders and creditors. It is the metric preferred by value investors and the basis of DCF (discounted cash flow) valuation, because it tells the ability of a company to produce money, not just profits on paper.

How the FCF is calculated

The most used formula is: FCF = operating cash flow − CapEx. The operating cash flow (from the cash flow statement) is the cash generated by ordinary operations; the capital expenditures (CapEx) are the investments in plants, machinery, technology. With an operating cash flow of 500,000 and CapEx of 150,000, the FCF is 350,000. It is the cash the company can use freely after reinvesting what is needed to keep operating and growing.

The FCF margin

The FCF margin is the Free Cash Flow relative to revenue, as a percentage: FCF / revenue × 100. With an FCF of 350,000 and revenue of 2,000,000, the margin is 17.5%: the company turns 17.5% of the turnover into free cash. It is a powerful indicator of business quality: companies with a high and stable FCF margin are efficient cash machines. It lets you compare cash generation between companies of different sizes, which the absolute FCF does not allow.

The capex intensity

The capex intensity is the CapEx relative to revenue: how much a company must invest to generate turnover. A "capital-light" company (software, services) has low capex intensity and converts revenue into FCF more easily; a "capital-heavy" one (industry, telecom, energy) has high intensity and retains less free cash. With CapEx of 150,000 on 2,000,000 of revenue, the intensity is 7.5%. It is a useful lens to understand the nature of the business and its ability to generate cash.

The conversion of the operating cash flow

The conversion is the FCF relative to the operating cash flow: how much of the cash generated by operations survives after capex. With an FCF of 350,000 on 500,000 of operating cash flow, the conversion is 70%: 70% of the operating cash becomes free cash. A high conversion indicates the company does not need to reinvest too much to maintain itself; a low one signals a capital-hungry business. It is another way to read the intensity of the investments relative to the cash generated.

How the calculator works

Enter the operating cash flow, the capital expenditures (CapEx) and the revenue. The calculator returns the Free Cash Flow, the FCF margin, the capex intensity and the conversion rate, with an assessment of cash generation. It is the quickest way to understand whether a company really produces money or whether the profit on the books hides a weak cash flow. Try different capex levels to see how much the investments weigh on the FCF.

The values you need

You need three numbers from the cash flow statement and the income statement. The operating cash flow, reported in the cash flow statement. The CapEx (capital expenditures), usually in the investing activities section. The revenue from the income statement, to calculate the margin. Make sure they are for the same period. If you do not have the operating cash flow, some approximate it with net income plus depreciation, but the statement figure is more accurate.

Interpreting the FCF margin

How to read the FCF margin (general references, they vary by sector):

A negative FCF is not always bad: it can indicate a phase of strong investment in growth, to be evaluated in context.

FCF, net income and EBITDA compared

Three ways to measure performance, with crucial differences:

The FCF is the hardest to "embellish": it measures the true cash, after the investments needed to stand.

Example: same operating cash flow, different capex

With an operating cash flow of 500,000 and revenue of 2,000,000, how the FCF changes as the capex varies:

The higher the capex, the less FCF: capital-intensive companies retain much less free cash at equal operating cash flow.

Why the FCF is so important

The FCF is the cash that really matters, the one with which a company can make choices: repay debt, distribute dividends, buy back shares, finance acquisitions or build a reserve. A company can have accounting profits but negative FCF if it burns cash in working capital or investments: it is a risk signal. Conversely, a strong and growing FCF is the sign of a healthy and resilient business. It is the reason experienced investors look at the FCF before the profit.

What the calculation does not consider

The calculation uses the basic formula (operating cash flow − CapEx). There are more refined variants: the FCF to firm (unlevered, before financial charges) and the FCF to equity (after debt), used in valuations. The operating cash flow can be volatile due to working capital changes: a single year can mislead, better to look at the average. It does not distinguish between maintenance and growth capex, which have different meanings. It is an estimate of cash generation, to be read over time.

Common mistakes

• Confusing the FCF with net income (accounting, not cash).
• Using EBITDA as a proxy for cash (ignores capex and working capital).
• Evaluating a single year: the operating cash flow can fluctuate a lot.
• Not distinguishing maintenance capex from growth capex.
• Confusing negative FCF with a problem when it is investment in growth.

How to use the calculator

Enter operating cash flow, CapEx and revenue. Read the FCF and the FCF margin to judge cash generation, the capex intensity to understand the nature of the business and the conversion to see how much operating cash survives. Compare the FCF margin with that of competitors and with the company's history. Simulate different capex levels to understand the impact of investments. Always look at the trend over time, not a single year.

Practical example

A company has an operating cash flow of 500,000, invests 150,000 in CapEx and has revenue of 2,000,000. The calculation gives a Free Cash Flow of 350,000, an FCF margin of 17.5%, a capex intensity of 7.5% and a conversion of 70%, with the verdict "high FCF margin: strong cash generation". The company turns over 17% of revenue into free cash and converts 70% of the operating cash flow: a solid financial profile, with abundant cash for debt, dividends or growth. Enter your numbers for your real situation. The calculation uses the basic formula FCF = operating cash flow − CapEx; it does not distinguish maintenance and growth capex or consider volatility; it should be read over time. It is an informational estimate, not investment advice.

Frequently asked questions

What is Free Cash Flow?

It is the cash a company generates after paying the investments (CapEx) needed to maintain and grow the business. It is calculated as operating cash flow minus CapEx. It is the cash actually available for debt, dividends, buybacks or acquisitions.

How is the FCF calculated?

FCF = operating cash flow − CapEx. The operating cash flow is from the cash flow statement, the CapEx from the investing expenses. With operating cash flow 500,000 and CapEx 150,000, the FCF is 350,000. It is the most used basic formula.

What is the difference between FCF and net income?

Net income is an accounting figure, influenced by non-monetary items (depreciation, provisions) and accounting policies. The FCF is real cash, after the necessary investments. A company can have positive profit but negative FCF: the FCF is harder to "embellish".

What is the FCF margin?

It is the Free Cash Flow divided by revenue, as a percentage. With FCF 350,000 and revenue 2,000,000, it is 17.5%: the company turns 17.5% of the turnover into free cash. It lets you compare cash generation between companies of different sizes.

What is capex intensity?

It is the CapEx divided by revenue: how much a company must invest to generate turnover. "Capital-light" companies (software, services) have low intensity and more FCF; "capital-heavy" ones (industry, energy) have high intensity and less free cash.

Is a negative FCF always a problem?

No. It can indicate a company in strong investment to grow (high capex today for future revenue), typical of expansion phases. It becomes a problem if it is chronic and does not bring growth, or if it derives from a weak operating cash flow. It should be evaluated in context.

Why do investors look at the FCF?

Because it is the cash that really matters: the one with which the company can repay debt, pay dividends, buy back shares or make acquisitions. It is the basis of the DCF valuation and harder to manipulate than the accounting profit. A strong and growing FCF signals a healthy business.

What is the difference between FCF and EBITDA?

EBITDA ignores both CapEx and working capital changes: it overestimates the available cash. The FCF includes both, so it is much closer to the real cash. Using EBITDA as a cash proxy is a common mistake, especially in capital-intensive companies.

What is the conversion of the operating cash flow?

It is the FCF divided by the operating cash flow: how much operating cash survives after capex. With FCF 350,000 on 500,000 of operating cash flow, the conversion is 70%. A high conversion indicates a business not hungry for capital.

Are there different versions of FCF?

Yes. The basic FCF (operating cash flow − CapEx) is the simplest. In valuations the FCF to firm (unlevered, before financial charges) and the FCF to equity (after debt) are used. This calculator uses the basic formula, suitable for a quick analysis of cash generation.

Should I look at a single year of FCF?

No, better to look at the trend. The operating cash flow can fluctuate a lot due to working capital changes or one-off events, and the capex can be concentrated in some years. The average over several years gives a more reliable picture of the true cash generation.

Is it investment advice?

No, it is an informational tool that calculates the FCF and related metrics. It uses the basic formula and does not distinguish maintenance and growth capex or consider volatility. For investment decisions, supplement the FCF with the complete analysis of the statements and the sector.

Updated July 2026