DEFINITION of 'Trailing FCF'

Trailing FCF (free cash flow) measures the company's free cash flow for a prior period. The previous 12 months' cash flow is a commonly used figure, as it measures the cash flow to the firm generated over the course of the past year. Trailing FCF is used by investment analysts in calculating a company's free cash flow yield.

BREAKING DOWN 'Trailing FCF'

Trailing FCF is important to investors because it shows how much money a company has brought in over the last year, after subtracting capital expenditures. It is calculated by starting with the previous 12 months' earnings before interest and taxes (EBIT), then multiplying it by [1-(the firm's tax rate)]. Depreciation and amortization expenses that have been subtracted over the period are then added back to the product. Changes in working capital and capital expenditures incurred over the period are then subtracted.

The more free cash flow a company has, the more easily it can pay its creditors and investors and reinvest in itself. A strong trailing free cash flow multiple can be a sign that a stock is a good investment when combined with other signs of financial strength, such as increasing revenues, order and sales growth, controlled SG&A costs, increasing gross profits and solid earnings per share.

RELATED TERMS
  1. Free Cash Flow Per Share

    On a per share basis, free cash flow per share is cash available ...
  2. Non-Operating Cash Flows

    Non-operating cash flows are inflows and outflows of cash that ...
  3. Cash Position

    The amount of cash that a company, investment fund or bank has ...
  4. Free Cash Flow-To-Sales

    Free cash flow-to-sales is a performance ratio that measures ...
  5. Cash Per Share

    Cash flow per share is the broadest measure of available cash ...
  6. Cash Flow From Operating Activities ...

    Cash Flow From Operating Activities (CFO) is an accounting item ...
Related Articles
  1. Trading

    How To Value Airline Stocks

    We explain what drives the stocks of airline companies and how best to assess their values.
  2. Investing

    Evaluating A Statement Of Cash Flows

    The metrics for the Statement of Cash Flows is best viewed over time.
  3. Investing

    Fundamental Case Study: Is Amazon's Cash Flow Actually Solid? (AMZN)

    Review Amazon's cash flow situation, including its free cash flow yield, operating cash flow from organic growth and cash flow from debt financing.
  4. Investing

    Free Cash Flow vs EBITDA: Which Should You Analyze

    FCF and EBITDA are two ways of looking at the earnings of a business. EBITDA might be better for comparison purposes, while FCF is good for valuation.
  5. Investing

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  6. Investing

    Why Goldman Is Warning About Free Cash Flow Yield (GS)

    Learn why Goldman Sachs is alerting investors to the importance of cash flow, and discover a recommended alternative equity valuation metric to free cash flow.
  7. Investing

    5 Companies With Huge Cash Flow (AAPL,VZ,MSFT,WMT)

    These five companies have major cash flow which makes them good long-term bets.
  8. Investing

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  9. Investing

    Analyzing the Price-to-Cash-Flow Ratio

    Find out how analyzing the price-to-cash-flow ratio can help you make batter investment decisions.
RELATED FAQS
  1. What is the difference between cash flow and free cash flow?

    Learn about the main differences between cash flow and free cash flow. In addition to the differences, learn how to calculate ... Read Answer >>
  2. What is the formula for calculating free cash flow in Excel?

    Find out more about free cash flow, the formula for calculating free cash flow and how to calculate a company's free cash ... Read Answer >>
  3. What is the difference between cash flow and fund flow?

    See how cash flow and fund flow differ from each other, and why fund flow can be used very differently by accountants and ... Read Answer >>
  4. What is the difference between cash flow and revenue?

    Understand the difference between cash flow and revenue as they relate to corporate accounting and the financial evaluation ... Read Answer >>
  5. What is the difference between net income and cash flow from operating activities?

    Learn how net income differs from cash flow from operating activities and how noncash expenses and changes in working capital ... Read Answer >>
Hot Definitions
  1. Treasury Yield

    Treasury yield is the return on investment, expressed as a percentage, on the U.S. government's debt obligations.
  2. Return on Assets - ROA

    Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
  3. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  4. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  5. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  6. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
Trading Center