Free Cash Flow Conversion
Calculate the free cash flow conversion, the share of net income that a company turns into free cash flow.
A conversion around or above 1 means the reported earnings are backed by cash, as depreciation and other non-cash charges outweigh the capital expenditure and the working capital tied up. A conversion persistently well below 1 is an earnings quality warning: profits are reported but do not arrive as cash, because of heavy investment, growing receivables or inventory, or aggressive accruals. Credit analysts and equity analysts use it alongside the income quality ratio (get_income_quality_ratio, operating cash flow over net income), which is the same comparison before capital expenditure.
The formula is as follows:
\[\text{Free Cash Flow Conversion} = \text{Free Cash Flow} / \text{Net Income}\]With a loss the ratio flips sign and has no meaning, so a net income of zero or less gives NaN.
Also known as: FCF conversion, cash conversion ratio, FCF to net income, free cash flow to earnings.
Free Cash Flow Conversion in Python or via the MCP
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_free_cash_flow_conversion as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(
["AAPL", "AMZN", "NFLX"],
api_key="FINANCIAL_MODELING_PREP_KEY",
start_date="2021-01-01",
end_date="2025-12-31",
)
toolkit.ratios.get_free_cash_flow_conversion()
Or, after setting up the Finance Toolkit MCP, ask:
How much of their net income did Apple, Amazon and Netflix convert into free cash flow from 2021 to 2025?
Which returns:
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| AAPL | 0.9818 | 1.1166 | 1.0267 | 1.1608 | 0.8818 |
| AMZN | -0.4414 | nan | 1.0589 | 0.5549 | 0.0991 |
| NFLX | -0.0258 | 0.3603 | 1.2807 | 0.7945 | 0.8616 |
Parameters
get_free_cash_flow_conversion accepts the following parameters.
| Parameter | Type | Description | Example |
|---|---|---|---|
rounding | int | None | The number of decimals to round the results to. Defaults to None, which uses the rounding of the Toolkit (4 unless set otherwise). | 2 |
growth | bool | Whether to calculate the growth of the ratios. Defaults to False. | True |
lag | int | list[int] | The lag to use for the growth calculation. Defaults to 1. | 4 |
compound | bool | Whether the growth is the compound annual growth rate over the lag (e.g. lag=5 for the five-year CAGR) instead of the total change. Defaults to False. | False |
standardize | bool | Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False. | True |
trailing | int | The number of periods to sum flows (income and cash flow statement items) over. E.g. 4 with quarterly data gives the trailing twelve months (TTM) and 3 with annual data a three-year cumulative figure. Defaults to None, which uses single-period flows. | 4 |