Levered Free Cash Flow Calculator

Levered free cash flow (LFCF) is the cash a company has left after it pays both its operating costs and its debts. The "levered" part is what sets it apart from unlevered free cash flow, which ignores debt entirely. Because LFCF subtracts mandatory debt repayments, it shows what's actually available to shareholders for dividends, buybacks, or reinvestment. Enter the figures from a company's financial statements to work it out.

What is levered free cash flow?

The word "levered" refers to leverage, which is just another word for debt. That is the whole distinction: LFCF is what's left after a business covers its operating costs, capital expenditures, working capital needs, and required debt payments. Unlevered free cash flow stops short of that last item.

It comes down to one equation:

A positive result means the company brings in enough cash to cover everything and still has money left over. A negative result means it's spending more than its operations bring in once you account for debt, capital investment, and working capital.

How to use this calculator

1. Start with EBITDA, taken straight from the income statement

2. Add capital expenditures, listed under investing activities on the cash flow statement

3. Enter the net change in working capital, which captures how shifts in current assets and liabilities affected cash

4. Pull in mandatory debt repayments from the financing section of the cash flow statement

5. Leave the fifth field blank, and it fills in on its own

Enter any four of the five values and the calculator solves for the one you left out.

Understanding the formula

Suppose Company XYZ reports the following annual figures:

• EBITDA: $500,000

• Capital expenditures: $100,000

• Net change in working capital: -$20,000 (working capital increased, consuming cash)

• Mandatory debt repayments: $80,000

Plugging these values in:

Company XYZ ends up with $300,000 in levered free cash flow, money that can go toward dividends, share buybacks, an acquisition, or simply padding the cash reserve. Flip the working capital change to +$20,000 (meaning working capital shrank and freed up cash) and LFCF climbs to $340,000.

Applications

Analysts lean on LFCF when they line up companies side by side, since it shows which businesses throw off real cash relative to the debt they carry. It also feeds straight into equity valuation: a discounted cash flow model for equity uses LFCF precisely because that's the cash that belongs to shareholders.

It doubles as a health check. A company can look profitable on its income statement and still post negative LFCF year after year, and that gap is usually the first sign something is off. Dividends are the other side of the same coin: a business with steady LFCF has the room to keep paying them, and to raise them.

Tips for accuracy

Use trailing twelve-month figures if you want the most current view. Enter CAPEX and debt repayments as positive numbers; the formula already handles the sign and subtracts them for you. And double-check that your working capital figure reflects only operating changes, not anything that belongs in the financing or investing sections.

This calculator provides estimates for educational and analytical purposes. For investment decisions, consult a qualified financial advisor who can assess your complete financial situation.

FAQ

What's the difference between levered and unlevered free cash flow?

Unlevered free cash flow leaves debt payments out, so it shows the cash a business generates before any financing costs. Levered folds those payments back in, which leaves you with the cash that actually belongs to equity holders.

Can LFCF be negative?

It can. When that happens, the company's cash obligations are outrunning what its operations bring in, often because of a heavy debt load, a big year of capital spending, or earnings that are sliding.

Where do I find these numbers?

EBITDA comes from the income statement, or you can build it up from operating income. The other three (CAPEX, working capital changes, and debt repayments) all sit on the cash flow statement, in the investing and financing sections.

How often should I recalculate LFCF?

Once a quarter, when fresh statements come out, is plenty for most purposes. Trailing twelve-month figures smooth out seasonal swings so one odd quarter doesn't throw off the picture.