Free Cash-Flow

Free cash flow is defined as operating cash flow minus cash flow from investment activities for property, plant and equipment (CapEx). With free cash flow, companies can e.g. Pay dividends, buy back shares or pay back the repayment of the debt. In general, the cash flow shown (cash flow statement) in companies' balance sheets is difficult to manipulate. That is why Finanzoo in FScore weights this key figure (KFCV - course free cash flow ratio) higher than the P / E. For this purpose, the free cash flow is also set in relation to the current exchange rate.


Free Cash Flow to the Firm (FCFF)

In addition to the free cash flow mentioned above, there are several variants for the calculation, which must be differentiated very precisely. Each method has a different perspective and a different message. The basic version of the FCFF is calculated from: net income + non-cash components (e.g. depreciation) + interest expenses - investments in fixed assets - investments in working capital (e.g. inventories). The FCFF takes interest and non-cash components into account based on net income or EBIT. This alone shows that the internal calculation can be carried out with different values. Even more uncertainties arise from future estimates that are gained from the past.