The cash that's actually yours after the business takes its cut
A manufacturing shop reports $300,000 in net income and the owner feels rich. Then he looks at the bank account and there's barely $40,000 of breathing room. Where did the rest go? Into a new CNC machine, replacement tooling, and a delivery van — capital spending the business needed just to keep running and growing. Profit on the income statement is not the same as cash in your hand, and free cash flow is the number that closes that gap.
Free cash flow is the cash a business generates from operations after subtracting the money it must reinvest in capital assets. The core formula is operating cash flow minus capital expenditures. If your operations throw off $500,000 in cash and you spend $150,000 on equipment and facilities to sustain and grow the business, your free cash flow is $350,000. That's the cash genuinely available to pay down debt, distribute to owners, build a reserve, or fund the next move — without borrowing or raising more capital.
This is the number that separates businesses that look healthy from businesses that are healthy. A company can post rising profits for years while free cash flow stays flat or negative, because every dollar of profit gets swallowed by the equipment and inventory needed to produce it. Profit can be shaped by accounting choices — depreciation schedules, revenue timing, non-cash entries. Free cash flow is harder to fake. It's the cash, after the bills the business can't avoid.
The calculator also gives you two ratios that turn the raw figure into a verdict. FCF margin is free cash flow divided by revenue — $350,000 on $3.5 million in sales is a 10% margin, meaning the business converts ten cents of every revenue dollar into truly free cash. FCF yield compares free cash flow to the business's value, telling an owner or buyer how much cash return the enterprise generates relative to what it's worth.
Run this whenever you're deciding what you can safely take out of the business, whether you can self-fund an expansion, or how much debt you can actually service. Profit tells you the business worked. Free cash flow tells you what you get to keep.