Cash not required for operations or for reinvestment. Often defined as earnings before
interest (often obtained from the operating income line on the income statement) less capital expenditures less the change in
working capital. In terms of a formula,
Free cash flows=
Sales (Revenues from operations)
-COGS (Cost of Goods Sold-Labor, Material, book depreciation)
-SG&A (Selling, General Administrative costs)
EBIT (Earnings Before Interest and Taxes or Operating Earnings)
-Taxes (Cash Taxes)
EBIAT (Earnings Before Interest After Taxes)
+DEP (Book depreciation)
-CAPX (Capital Expenditures)
-ChgWC (Change in Working Capital)
C (Free Cash Flows)