You can find your capital expenditure on the Statement of Cash Flows.

Capital Expenditure: Capital expenditures include money your business spends on fixed assets, like land, real estate, or equipment.

You can calculate your working capital using the total assets and liabilities on your Balance Sheet. Working Capital: Working capital is the difference between your assets and liabilities and represents the capital used in the day-to-day operation of your business.You’ll find depreciation and amortization on your Income Statement. Amortization, on the other hand, is a method of breaking down the initial cost of an asset over its lifetime. Depreciation is the measurement of how that value decreases. Depreciation/Amortization: Many of your business assets (like equipment) lose value over time.You’ll find this on your Income Statement. Net income: The total income left over after you’ve deduced your business expenses from total revenue or sales.To start, you’ll need accounting software to generate your company income statement or balance sheet available to pull key financial numbers from.įirst, let’s get the pertinent financial terms straight. How to calculate free cash flowĬalculating your business’ free cash flow is actually easier than you might think. While a traditional cash flow statement (like the kind you can get from Wave reports) gives you a picture of your business’ cash at a given time, that doesn’t always help with planning and budgeting-because it doesn’t truly reflect the cash you have available, or free to use.Ĭan you afford to invest in that new software? Do you have enough cash on hand to pay for that virtual assistant when their invoice comes due? How much cash do you have free to spend on thank you cards for your clients?Ĭalculating the cash you have available to spend (via the FCF formula) helps answer those questions and others like them. One of the most common and important cash flow formulas is free cash flow (or FCF). The above three cash flow formulas below make it easier to get that picture of your business financials and better understand how money flows into and out of your business. That’s why every business owner needs to develop an understanding of cash flow and what it means for their business.

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