Free cash flow (FCF) 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, refer to its balance sheet and subtract its capital expenditures from its total cash flow from operating activities.
Calculating Free Cash Flow in Excel
For example, according to its cash flow statement as of Sept. 27, 2014, Apple Incorporated reported total cash flow from operating activities of $59.713 billion. Apple reported capital expenditures of -$9.571 billion for the period ending Sept. 27, 2014.
Apple's competitor, Google Incorporated, reported total cash flow from operating activities of $22.376 billion and capital expenditures of -$10.959 billion for the period ending Dec. 31, 2014.
To compare the FCFs between Apple and Google in Excel, enter the words "Apple Incorporated" in cell B1 and "Google Incorporated" in cell C1.
Next, enter the date "Sept. 27, 2014" 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 "=59713000000" into cell B3 and "=9571000000" into cell B4.
To calculate Apple's FCF, enter the formula "=B3-B4" into cell B5. Therefore, the resulting FCF of Apple is $50.142 billion.
Now, enter the date "Dec. 31, 2015" into cell C2. Enter "=22376000000" into cell C3 and "=10959000000" into cell C4. Next, enter the formula "=C3-C4" into cell C5. The result demonstrates that Google's FCF is $11.417 billion.