Free cash flow: drag capex
Drag capex. NOPAT, depreciation and working capital stay still, so free cash flow moves only because the capex line does. EBITDA does not move at all. That is the point of the picture.
Unlevered FCF
$55,000,000
Capex
$30,000,000
EBIT, tax, D and A and working capital stay put. EBITDA is still $120,000,000. Only the capex line moves FCF. Illustrative arithmetic, not a cash forecast or advice.
NOPAT
$75,000,000, held still.
In short
- Drag the bar right for heavier capex and thinner free cash flow.
- Drag it left toward a maintenance year, where more of NOPAT survives as cash.
- Watch EBITDA sit still: it has not paid capex.
- Focus the handle and use the arrow keys to step capex.
NOPAT, then the reinvestment lines
How free cash flow works is the walk. The free cash flow calculator is the table. EBITDA against free cash flow is why the add-back is not cash.
Capex is not a footnote
A firm can print a fine NOPAT and still consume cash if it is building plants. How NOPAT works stops at . This picture takes the next lines off.
Unlevered means before interest
Free cash flow to the firm is the series that belongs against WACC. EBITDA is a starting point.
Common questions
Why does EBITDA not move?
Because capex is not in it. That is why lining EBITDA up next to FCF and calling the gap a finding mixes two objects.
Is a working-capital release the same as lower capex?
Both raise FCF this year. Stock can only be run down once. Capex can stay high.
Is this cash the firm can pay out?
It is unlevered free cash flow on a teaching sheet. It is educational material, not advice.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.