Variables of The FCFF Formula

You might also like

Download as docx, pdf, or txt
Download as docx, pdf, or txt
You are on page 1of 1

Variables of the FCFF Formula

Earnings before interest and taxes, EBIT, is, as it suggests, the


earnings from a company's operations before adjusting for interest
expense and taxes. EBIT can be found on the company's income
statement or calculated from the cash flow statement. The free cash
flow to firm formula does adjust for taxes by multiplying EBIT by one
minus the tax rate.
Capital expenditures (Capex) is the capital used to fund operations in
the long run. Capital expenditures can be found on a company's cash
flow statement.
Working capital is capital used to fund operations in the short run.
Working capital is current assets minus current liabilities. As opposed
to longer term capital expenditures, working capital connotes
expenses due within one year or less. The change in working capital
can be calculated using a company's balance sheet.

You might also like