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Calculation of free cash flow

Hi,

I am trying to understand the calculation of the FCF. Most other sites calculate FCF = Operating Cash flow - CapEx. https://www.investopedia.com/ask/answers/033015/what-formula-calculating-free-cash-flow.asp

The cash flow statements on simfin don't include CapEx directly - is Change in Fixed Assets & Intangibles the same? the value don't match CapEx from the cash flow statements. (I was looking at Macys as an example)

I am sure I am missing something very simple but can't figure it out :(

Thanks for your help!

Comments

  • Hi stefan,
    Yes, we take the total change, that is
    Change in fixed assets & intangibles =
    + disposition of fixed assets & intangibles
    - acquisition of fixed assets & intangibles
    The main reason is that a lot of companies don't report acquisition/disposition separately, so this is a bit of a workaround. In most cases the disposition is negligible though as it should be outweighed by the acquisitions - in my experience at least.
  • Hey,

    I have a related question regarding FCF calculation:
    I was trying to reconstruct the FCF for Tesla but getting a different result which I could track down to the calculation of 2019 - Q4 for "Operating Income (Loss)" and "Income Tax (Expense) Benefit, net". In both cases, the values used differ from those in the profit & loss statement. The calculation process of Q4 seems to differ in FCF and pl calculation..

    Best regards
    Thomas
  • edited May 21
    Hi Thomas,
    can you post some more steps of your calculation or the exact numbers, and explain with what figure you are comparing this (i.e. the bulk download numbers?).
  • Sure!
    I was working with the quarterly statements using the API and compared them to the TTM FCF ratio in the dashboard.
    To first have the same data base, I started by reconstructing the TTM period 2019 Q2 to 2020 Q1.

    For Operating Income, in the dashboard you calculate:

    (3,282) =
    283 (Q1 2020)
    + (3,776) (Q4 2019)
    + 261 (Q3 2019)
    + (50) (Q2 2019)

    Operating Income for Q4 2019 though is 347.

    When comparing this to your source (Profit & Loss statement FY 2019), I can also find the issue.

    "Loss from operations" equals -69,000,000 while "Total operating expenses" equals 4,138,000,000.
    Thus your operating income Q4 2019 recalculations in the Tesla ratio section (which is also used for FCF and probably some other ratios) are based on FY 2019 Total operating expenses but should be based on FY 2019 Loss from operations.


    For Income Tax (Expense) Benefit, net, I think you've mistakenly used the wrong sign for the Q4 2019 recalcualtions. Your dashboard calculations in the FCF ratio section:

    + 152 =
    110 (FY 2019)
    - 23 (Q1 2019)
    - 19 (Q2 2019)
    - 26 (Q3 2019)

    Though it should be -110+23+19+26 = -42

  • edited May 28
    Hi,
    Thanks for reporting this. The TSLA numbers for Q4 2019 were not displayed correctly on the website, this is due to the dashboard numbers coming from an "old" system that sometimes doesn't update figures correctly (bulk download is not affected by this, as that is already run by the new backend). I refreshed the numbers now, and they should be correct now (operating income for Q4 2019 is 347 now). I'm working on switching the dashboard over to the new backend too, so that this doesn't happen anymore.
  • Yes getting equivalent results now
    Thanks!
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