Free cash flow calculator
- Formula
- Operating cash flow − Capital expenditures
Free cash flow = Operating cash flow − Capital expendituresFrom the cash flow statement. Negative is cash used.
Purchases of property, equipment and capitalized software.
Free cash flow
$510,000
How it’s worked out
- 1Operating cash flow − capex$820,000 − $310,000$510,000
Runs in your browser; nothing you type is sent anywhere. Amounts in US dollars.
Worked on a real month of books
Northwind Traders, Inc., September 2026 (accrual basis, USD), the month the free course is taught on. Operating cash flow is from the course's indirect cash flow statement; capex is the van. Every figure is read off the course's posted ledger, not typed.
- 1Operating cash flowIndirect method, from net income($3,100)
- 2Capital expendituresPurchase of the van$24,000
- 3Free cash flow($3,100) − $24,000($27,100)
See the statements these come from in the course.
How to read it
Free cash flow is the cash a business produces after paying to run and maintain itself — what is left for lenders, owners or growth.
For a startup it is usually negative and close to net burn. The trend toward zero is the path to default alive.
Common mistakes
- Starting from EBITDA instead of operating cash flow.
- Leaving capitalized software development out of capex.
Questions
- How is free cash flow calculated?
- Operating cash flow less capital expenditures: the cash the business generates after keeping its asset base going.
- Why is free cash flow different from net income?
- Net income includes non-cash items and ignores working capital and capex. Free cash flow measures the cash itself.
Read it with
The metrics read alongside this one, and the terms it is confused with.
- Gross burn vs net burnGross burn is all the cash a company spends in a month; net burn is that spending less the cash it collects — net burn is what shortens runway.Compare
- CapEx vs OpExCapital expenditure buys an asset that will serve for more than a year and is depreciated over that life; an operating expense is consumed in the period and hits the P&L in full immediately.Compare
- EBITDA calculatorEBITDA is a profitability metric, calculated as Net income + interest + income taxes + D&A (≈ operating income + D&A with no other non-operating items).Calculator
- Working capital calculatorWorking capital is a liquidity and working-capital metric, calculated as Current assets − Current liabilities.Calculator
- Cash ratio calculatorCash ratio is a liquidity and working-capital metric, calculated as Cash and equivalents ÷ Current liabilities.Calculator
- Free cash flowFree cash flow is a cash and runway metric, calculated as Operating cash flow − Capital expenditures.Term
The formula is the one the glossary states, and the arithmetic is unit-tested. A ratio with nothing to divide by shows a dash — undefined is not zero. General information, not financial advice.