How to calculate free cash flow?
Free cash flow represents cash generated by the company through the income statement, but also needs to factor in changes in net working capital, capital expenditures, and other cash flow items.
Unlevered free cash flow represents cash the company generates or losses prior to factoring in interest on debt, as well as state and federal income taxes. Free cash flow is a key metric as it helps a company understand if they can pay their debt on a monthly/quarterly/annual basis.
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How to calculate EBITDA?
EBITDA is a company’s net income but excludes the impact of interest income or expense related to debt instruments, depreciation and amortization, and stated and federal income taxes. The whole point of calculating EBITDA is to better understand a company’s GAAP cash flow. The reason we exclude depreciation and amortization is because it is not...
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How to calculate gross margin?
Gross margin is gross profit divided by revenue. You will need to calculate gross profit first, which is revenue less cost of goods sold (step #1 below): Both gross profit ($) and gross margin (%) are used to assess how much money the company makes on each dollar of revenue after factoring in the cost...
How to calculate EBITDA?
EBITDA is a company’s net income but excludes the impact of interest income or expense related to debt instruments, depreciation and amortization, and stated and federal income taxes. The whole point of calculating EBITDA is to better understand a company’s GAAP cash flow. The reason we exclude depreciation and amortization is because it is not...
How to calculate gross margin?
Gross margin is gross profit divided by revenue. You will need to calculate gross profit first, which is revenue less cost of goods sold (step #1 below): Both gross profit ($) and gross margin (%) are used to assess how much money the company makes on each dollar of revenue after factoring in the cost...
