Levered Free Cash Flow Calculator
Enter EBITDA, the cash effect of the change in working capital, capital expenditures and mandatory debt payments to see levered free cash flow.
Updated
Levered Free Cash Flow Calculator
Our Levered Free Cash Flow Calculator shows how much cash a business has left for its shareholders after it reinvests in the business and meets its debt obligations. Type EBITDA, the cash effect of the change in working capital, capital expenditures and mandatory debt payments. It returns levered free cash flow (LFCF) with the cash before debt payments and the share of EBITDA that is left. It suits investors, private equity and credit analysts, finance students and owners checking whether a business can carry its debt.
Quick answer
Levered free cash flow is EBITDA + change in working capital − CapEx − mandatory debt payments: with EBITDA of 750,000, working capital using 25,000, CapEx of 120,000 and debt payments of 30,000, 750,000 − 25,000 − 120,000 − 30,000 = 575,000.
- Working capital: enter a negative number when it grows (uses cash) and a positive one when it shrinks.
- Mandatory debt payments: required principal, plus interest if you want it counted.
- Positive result: cash available to shareholders.
- Negative result: the business needs reserves or new funding.
What Is Levered Free Cash Flow?
Levered free cash flow (LFCF) is the cash a company has left after paying its operating costs, reinvesting in working capital and fixed assets, and meeting its required debt payments. Because the lenders have already been paid, what remains belongs to the shareholders. It can be paid out as dividends, used to buy back shares, or kept to grow the business or pay debt down early.
Lenders and equity investors watch it closely. A company with steady positive levered free cash flow can carry its debt and still reward its owners. A company with negative LFCF depends on cash reserves or new borrowing.
Levered Free Cash Flow Formula
+ change in working capital
− capital expenditures
− mandatory debt payments
- EBITDA: earnings before interest, taxes, depreciation and amortization, a starting point for operating cash.
- Change in working capital: the cash effect of changes in receivables, inventory and payables. When working capital grows, cash is tied up, so the figure is negative.
- Capital expenditures (CapEx): cash spent on property, plant, equipment and other long-term assets.
- Mandatory debt payments: scheduled principal repayments, and interest if you want the result to include it.
A longer form starts from net income, which already has interest and taxes taken off:
+ D&A
− increase in working capital
− CapEx
+ net borrowing
This second form is often called free cash flow to equity (FCFE). The calculator uses the EBITDA form.
How to Calculate Levered Free Cash Flow
A company has EBITDA of 750,000. Its working capital grew, using 25,000 of cash. It spent 120,000 on equipment and had to repay 30,000 of debt:
− 120,000 − 30,000
= 575,000
- Adjust for working capital. 750,000 − 25,000 = 725,000.
- Subtract CapEx. 725,000 − 120,000 = 605,000.
- Subtract mandatory debt payments. 605,000 − 30,000 = 575,000.
Levered free cash flow is 575,000, about 76.67% of EBITDA, available to shareholders.
From EBITDA to Levered Free Cash Flow
The running total shows how much of EBITDA survives each step. Reinvestment takes 145,000 and debt payments take 30,000.
Getting the Working Capital Sign Right
| What happened | Enter |
|---|---|
| Receivables or stock grew | Negative |
| Payables shrank | Negative |
| Receivables or stock fell | Positive |
| Payables grew | Positive |
This is the most common mistake. Growing working capital means more cash is tied up in customers and stock, so it lowers free cash flow. On a cash flow statement the figure already has the right sign, so it can be copied across as it is.
Levered Free Cash Flow Examples
A mature retailer. EBITDA of 2,000,000, working capital released 150,000 as stock fell, CapEx of 400,000 and debt payments of 500,000:
− 400,000 − 500,000
= 1,250,000
About 62.5% of EBITDA is left for shareholders, enough for a steady dividend.
A fast-growing manufacturer. EBITDA of 900,000, working capital grew by 300,000, CapEx of 650,000 and debt payments of 100,000:
− 650,000 − 100,000
= −150,000
Growth is eating cash. The business is profitable at the EBITDA line but must borrow or raise equity to fund the gap.
A small services firm. EBITDA of 180,000, working capital grew by 10,000, CapEx of 40,000 and loan repayments of 60,000:
− 40,000 − 60,000
= 70,000
The loan takes a third of EBITDA, but 70,000 is still left for the owners.
Levered vs Unlevered Free Cash Flow
| Measure | Debt payments |
|---|---|
| Levered FCF | Taken off: cash for shareholders |
| Unlevered FCF | Not taken off: cash for all investors |
Unlevered free cash flow is used to value the whole company with the weighted average cost of capital. Levered free cash flow is used to value the equity with the cost of equity, and to judge whether debt is affordable. The gap between them is the cost of the debt. Use the Unlevered Free Cash Flow Calculator or the plain Free Cash Flow Calculator for those versions.
What Raises or Lowers Levered Free Cash Flow
Starting from the 575,000 example, each change below is made on its own:
| Change | LFCF |
|---|---|
| Starting point | 575,000 |
| EBITDA up 10% | 650,000 |
| Working capital released 25,000 | 625,000 |
| Debt payments 80,000 | 525,000 |
| CapEx up 100,000 | 475,000 |
Heavier borrowing lowers levered free cash flow through larger repayments, even when the business itself performs the same.
What the Result Leaves Out
- Taxes. EBITDA is before tax. For an after-tax figure, take cash taxes off EBITDA before you enter it.
- Interest. Interest is only counted if you include it in mandatory debt payments.
- New borrowing. Money raised from new loans is not added, so the result shows what operations alone can fund.
- One period. CapEx and working capital swing from year to year; look at several years together.
The result is for education and planning and is not financial or investment advice.
Key Terms
- Levered FCF
- Cash left for shareholders after debt payments.
- Unlevered FCF
- Cash for all investors, before debt payments.
- EBITDA
- Earnings before interest, taxes, D&A.
- Working capital
- Current operating assets minus current liabilities.
- CapEx
- Spending on long-term assets.
- FCFE
- Free cash flow to equity, a close cousin of LFCF.
How to Use the Levered Free Cash Flow Calculator
- Enter EBITDA. Type EBITDA for the period, such as 750,000. It can be negative.
- Enter the change in working capital. Type its cash effect: negative when working capital grows (such as −25,000), positive when it shrinks.
- Enter capital expenditures. Type the cash spent on long-term assets, such as 120,000.
- Enter mandatory debt payments. Type the required debt repayments for the period, such as 30,000. Type 0 if there are none.
- Read and copy the result. Levered free cash flow appears as you type, with the working, the cash before debt payments and the share of EBITDA left. Press Copy to copy it, or Clear or Esc to start again.
Example: EBITDA of 180,000, working capital using 10,000, CapEx of 40,000 and debt payments of 60,000 give levered free cash flow of 70,000.
Who Can Use This Calculator?
Frequently Asked Questions (FAQs)
How do you calculate levered free cash flow?
Start with EBITDA, add the cash effect of the change in working capital (negative when working capital grows), then subtract capital expenditures and mandatory debt payments.
What is the levered free cash flow formula?
LFCF = EBITDA + change in working capital − capital expenditures − mandatory debt payments.
What is the levered free cash flow for EBITDA of 750,000, working capital using 25,000, CapEx of 120,000 and debt payments of 30,000?
It is 575,000, because 750,000 − 25,000 − 120,000 − 30,000 = 575,000. That is about 76.67% of EBITDA.
What is the difference between levered and unlevered free cash flow?
Levered free cash flow is after debt payments and belongs to shareholders. Unlevered free cash flow is before debt payments and belongs to all investors, lenders included.
Can levered free cash flow be negative?
Yes. Heavy investment, growing working capital or large debt repayments can leave it negative, which means the business must use reserves or raise new money.
Is an increase in working capital positive or negative?
Negative. An increase ties up cash in receivables and stock, so enter it as a negative number. A decrease frees cash and is entered as a positive number.
Does levered free cash flow include interest?
It should. In this EBITDA-based formula, include interest in mandatory debt payments if you want it taken off.
Is the Levered Free Cash Flow Calculator free?
Yes. It is free to use, with no sign-up and no limit on how many times you use it.
Sources
- Wall Street Prep. Levered Free Cash Flow (LFCF).
- WallStreetMojo. Levered Free Cash Flow.
- Corporate Finance Institute. Unlevered Free Cash Flow.
- Corporate Finance Institute. Free Cash Flow to Equity (FCFE).
- Corporate Finance Institute. Working Capital Formula.
- Wikipedia. Free cash flow.
- Wikipedia. Free cash flow to equity.
Try our Levered Free Cash Flow Calculator to see how much cash is left for shareholders after debt payments.