Free Cash Flow to Firm (FCFF)
Free Cash Flow to the Firm (FCFF) is the cash flow available to all providers of capital, both debt and equity holders, after the company has paid all of its operating expenses and invested in the assets needed to sustain its operations. Because it is measured before any financing cash flows, FCFF is capital-structure neutral, making it the cash flow base typically discounted at the Weighted Average Cost of Capital (WACC) when valuing the Enterprise Value of a company directly.
The formula is as follows:
\[\text{NOPAT} = \text{EBIT} \cdot (1 - \text{Effective Tax Rate})\] \[\text{FCFF} = \text{NOPAT} + \text{Depreciation and Amortization} - \text{Capital Expenditure} - \text{Change in Net Working Capital}\]Also known as: FCFF, unlevered free cash flow.
Free Cash Flow to Firm (FCFF) in Python
get_free_cash_flow_to_firm is part of the Models module of the open-source Finance Toolkit. Install it with:
pip install financetoolkit -U
Then call get_free_cash_flow_to_firm as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(["AAPL", "MSFT"], api_key="FINANCIAL_MODELING_PREP_KEY")
toolkit.models.get_free_cash_flow_to_firm().loc["AAPL"]
Which returns:
| 2021 | 2022 | |
|---|---|---|
| Net Operating Profit After Taxes | 9.69732e+10 | 1.02259e+11 |
| Depreciation and Amortization | 1.1284e+10 | 1.1104e+10 |
| Capital Expenditure | 1.1085e+10 | 1.0708e+10 |
| Change in Net Working Capital | 4.911e+09 | -1.2e+09 |
| Free Cash Flow to Firm | 9.22612e+10 | 1.03855e+11 |
Parameters
get_free_cash_flow_to_firm accepts the following parameters:
- rounding (int, optional): The number of decimals to round the results to. Defaults to None.
- growth (bool, optional): Whether to calculate the growth of the values. Defaults to False.
- lag (int | list[int], optional): The lag to use for the growth calculation. Defaults to 1.
- standardize (bool, optional): Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False.
- trailing (int | None, optional): The trailing period to use for the calculation. Defaults to None.
- show_columns (list[str] | None, optional): List of columns to show in the results. If None, all columns will be shown. Defaults to None.