FCF calculation & Calculation of maintenance Capex

For the simplified calculation of Free Cash Flow, We use these reference values:

• EBITDA
• – Interests
• – Taxes
• – Maintenance Capex

We use EBITDA because it provides free benefits Depreciation and Amortization. What, otherwise we should add them to operating profit. This value can be found in the income statement.

For simplicity, We begin by subtracting the interest the company pays, either by the negative financial result or debt interest. In certain companies this value is not significant, but others do, so we included by default in this example, Apart from that, the outflow of cash. We can find this value in the income statement.

Also we subtract taxes, because the company has had to pay. In cases where the number of taxes vary greatly from one year to another, we must normalize this data. It is also found in the income statement.

Subtracting the maintenance Capex; Generally usually it found in the cash flow statement as costs / investments in active and also not usually separate between Capex maintenance and growth. Very regular companies do not need to make adjustment, But if we dig a little in the relationship between business growth and investment being made, we can reach a more or less approximate value that allows us to find the Capex.

According to the book Value Investing, From Graham to Buffett and Beyon, on your page number 96, as annotation, We find the detail of how they try to approximate this data.

 

In summary:

Capex growth = (media) of (Property plant equipment / Total Sales) x Increase (decrease) sales.

Capex Maintenance Capex = statement by the company – Capex growth.

 

 

Excel sample available.