How Can You Calculate Free Cash Flow in Excel?

The statement of cash flows on a financial statement sheds a lot of light on the movement of cash in and out of a company and shows how well a company manages its cash position. Free cash flow (FCF) is one of the more important measures derived from a cash flow statement.

Free cash flow is used in fundamental analysis to measure the amount of cash a company generates, after accounting for its capital expenditures. To calculate a company's FCF, one would refer to its balance sheet and subtract its capital expenditures from its total cash flow from operating activities.

Microsoft Excel is a comprehensive and easy-to-use tool for calculating different formulas and any other computational work in general. Below, see how to calculate free cash flow in Excel as well as how to run comparisons with other companies.

Key Takeaways

  • Free cash flow (FCF) is a measure of how much cash a company has generated, minus its capital expenditures.
  • The metric is an important one in fundamental analysis, demonstrating how well or poorly a company is managing its cash position.
  • To calculate FCF, read the company's balance sheet and pull out the numbers for capital expenditures and total cash flow from operating activities, then subtract the first data point from the second.
  • This can be calculated by hand or by using Microsoft Excel, as in the example included in the story.

Calculating Free Cash Flow in Excel

For example, according to its cash flow statement for fiscal year-end Sept. 26, 2020, Apple Incorporated reported a total cash flow from operating activities of $80.67 billion. Apple reported capital expenditures of $7.31 billion for the same period.

Apple's competitor, Alphabet Incorporated, reported total cash flow from operating activities of $65.12 billion and capital expenditures of $22.28 billion for the period ending Dec. 31, 2020.

To compare the FCFs between Apple and Alphabet in Excel, enter the words "Apple Incorporated" in cell B1 and "Alphabet Incorporated" in cell C1.

Next, enter the date "Sept. 26, 2020" into cell B2. Enter "Total Cash Flow From Operating Activities" into cell A3, "Capital Expenditures" into cell A4, and "Free Cash Flow" into cell A5. Then, enter "=80670000000" into cell B3 and "=7310000000" into cell B4.

To calculate Apple's FCF, enter the formula "=B3-B4" into cell B5. The resulting FCF of Apple is $73.36 billion.

Now, enter the date "Dec. 31, 2020" into cell C2. Enter "=65120000000" into cell C3 and "=22280000000" into cell C4. Next, enter the formula "=C3-C4" into cell C5. The result demonstrates that Alphabet's FCF is $42.84 billion.

In this instance, you would now be provided with both companies' free cash flow numbers, Apple's in cell B5, of $73.36 billion, and Alphabet's in cell C5, of $42.84 billion. One can also enter the numbers into each cell differently. For example, in cell B3, one wouldn't have to enter all the numerals to get a billion-dollar value. Instead, one could simply enter "=80.67," and in a separate cell, clarify that the numbers are in billions. For example, one can note "numbers in billions."

The Bottom Line

Microsoft Excel is an essential tool when working with numbers, as it provides automatic calculations and a simple layout for mathematical work. The formula for free cash flow is a basic one, as it requires only two numbers, both of which can be found easily on a company's financial statement. Once free cash flow is obtained, it helps understand how much available cash a company has for various uses, such as paying dividends or making investments that contribute to the health and growth of the company.

Article Sources
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  1. U.S. Securities & Exchange Commission. "Form 10-K: Apple," Page 33.

  2. U.S. Securities & Exchange Commission. "Form 10-K: Alphabet Inc.," Pages 54, 88.

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