Free Cash Flow (FCF) is an improved version of net profit (PAT). What is easily available in company’s financial statement is PAT. But FCF must be separately calculated by the analyst. 

Warren Buffett mentions Free Cash Flow as “Owners Income”. It was Buffett who made the use of Free Cash Flow popular for stock analysis.

What is the use of Free Cash Flow? FCF is used to calculate intrinsic value of a company. The method used to estimate the intrinsic value of stocks is done by using a financial model called Discounted Cash Flow (DCF)

Suggested Reading: Read in detail about the concept of Free Cash Flow.


Balance SheetCurrent YearLast Year
Fixed Asset (FA)
Current Asset (CA)
Current Liability (CL)
Borrowing (LT)
Borrowing (ST)
Profit-Loss A/c
Net Profit (PAT)
Depreciation



CalculationRemarks
Increase in FA
Capital Expenditure (CAPEX)
Working Capital (WC)
Change in Working Capital
New Debt (LT)
New Debt (ST)
New Debt
Free Cash Flow (FCF)