$$Net\: Income = EBITDA – Interest – Taxes – Depreciation\: \&\: Amortization$$
Income can be calculated using EBITDA through the following formula: Operating profitability of the company since it excludes depreciation and From Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) $$FCFE = EBIT – Interest - Taxes + Depreciation\: \&\: Amortization +/– Changes\: in\: WC – CapEx + Net\: Borrowing$$ĮBIT can be found in the company’s income statement and both Interest and taxes will also be listed in the income statement below EBIT. This means we can also rewrite the formula as: $$Net\: Income = EBIT – Interest - Taxes$$ In the balance sheet under the Liabilities sectionįrom Earnings before Income and Tax (EBIT) Debt includes both long term and short term debt and can be found Inventory and receivables while Current liabilities are payables and otherĪccrued liabilities and all of them are listed in the balance sheet under theĬurrent Assets and Current liabilities section respectivelyĭebt issued and debt repaid during the year and therefore can be both positive That amount else subtract it from the net figure. If changes in working capital is positive, add Therefore, it could beĮither positive or negative.
The net of current assets and current liabilities. $$Cash\: from\: Operations = Net\: Income + Depreciation \&\: Amortization +/- Changes\: in\: WC$$Īnd other non-cash expenses can also be found on the income statement under the $$FCFE = Net\: Income + Depreciation\: \&\: Amortization\: +/- Changes\: in\: WC - CapEx\: + Net\: Borrowing$$ The formula for FCFE can be rewritten as follows: This can be calculated in one of the following ways. If the cash flow statement is not readily available, we can calculate FCFE directly from the income statement of the company. Statement under the “Cash from Investing” section. Both these figures can also be found in the Cash Flow
$$FCFE = Cash\: from\: Operations - Capital\: Expenditure\: (Capex) + Net\: Borrowing$$įound in the Cash Flow statement under the “Cash from Operations” sectionįound in the Cash Flow statement under the “Cash from Investing” sectionīy subtracting the amount of debt repaid in the year from the total debt borrowedĭuring the year. Put simply, it is the amount of cash that the company generates after meeting various obligations such as capital expenditure, re-investment, debt, and other expense obligations.
Free Cash Flow to Equity (FCFE) is a valuation metric that determines the amount of cash that is potentially available to equity shareholders after all the expenses of the company have been taken care of.