Free Cash Flow to EBITDA
Calculate the free cash flow to EBITDA ratio, the share of EBITDA that remains as free cash flow after interest, taxes, working capital and capital expenditure.
EBITDA is often used as a proxy for cash flow (in leverage ratios such as net debt to EBITDA), and this ratio shows how good a proxy it is for a company. Credit analysts use it to see how much of the EBITDA is available to repay debt: capital-heavy businesses (utilities, telecoms, manufacturers) convert little of their EBITDA, asset-light businesses (software, services) most of it. EBITDA is operating income plus depreciation and amortization, as in the EBITDA margin.
The formula is as follows:
\[\text{Free Cash Flow to EBITDA} = \text{Free Cash Flow} / (\text{Operating Income} + \text{Depreciation and Amortization})\]An EBITDA of zero or less gives NaN, as the ratio flips sign.
Also known as: FCF/EBITDA, EBITDA cash conversion, EBITDA to FCF conversion, cash conversion of EBITDA.
Free Cash Flow to EBITDA in Python or via the MCP
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_free_cash_flow_to_ebitda_ratio as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(
["T", "VZ", "MSFT"],
api_key="FINANCIAL_MODELING_PREP_KEY",
start_date="2021-01-01",
end_date="2025-12-31",
)
toolkit.ratios.get_free_cash_flow_to_ebitda_ratio()
Or, after setting up the Finance Toolkit MCP, ask:
How much of their EBITDA did AT&T, Verizon and Microsoft keep as free cash flow from 2021 to 2025?
Which returns:
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| MSFT | 0.6877 | 0.6659 | 0.5809 | 0.5623 | 0.4402 |
| T | 0.5813 | 0.9228 | 0.4699 | 0.4127 | 0.4237 |
| VZ | 0.3997 | 0.2187 | 0.4027 | 0.3902 | 0.4133 |
Parameters
get_free_cash_flow_to_ebitda_ratio 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 |