Choose the cash flow before choosing the yield
A free cash flow yield compares a period of cash generation with a valuation at a specified date. The common starting point is cash flow from operations (CFO) less capital expenditures. The SEC notes that free cash flow has no uniform definition and may omit mandatory debt service. Read the reconciliation rather than relying on a provider label. SEC non-GAAP interpretations, question 102.07.
| Basis | Numerator | Denominator | Interpretation |
|---|---|---|---|
| CFO less capex | Adjusted CFO − capex | Market capitalization | A screening proxy before net borrowing; not full FCFE. |
| Simplified FCFE | Adjusted CFO − capex + net borrowing | Market capitalization | Equity cash flow after net debt financing. |
| Simplified FCFF | Adjusted CFO + interest × (1 − tax rate) − capex | Enterprise value | Firm cash flow before financing payments. |
The FCFE and FCFF formulas assume CFO includes interest and its tax effects on a consistent basis. Net borrowing is new debt less principal repaid, not total debt outstanding. More complex capital structures need further reconciliation, including preferred and noncontrolling claims. The worksheet is a simplified model for ordinary nonfinancial companies. CFA Institute cash flow valuation formulas.
Reconcile interest, capex and valuation dates
Check where the issuer reports interest paid. IAS 7 classification rules and the amendments introduced with IFRS 18 make the applicable reporting policy relevant. Do not automatically add interest back to CFO if it was never deducted. The worksheet accepts a signed adjustment so you can document the reconciliation to CFO after interest. Its FCFF shortcut also assumes a realized interest tax shield; cash interest, expense and cash taxes can differ. IFRS Foundation: IAS 7 and its amendments.
Enter capex as a positive cash outflow. If a filing shows purchases of property and equipment as −40, enter 40, not −40. Include the same asset categories for each peer; acquisitions, leases and capitalized development can require separate treatment. Do not combine annual CFO with one quarter of capex. A trailing twelve-month figure should use four non-overlapping quarters or annual plus current year-to-date less prior year-to-date.
Market capitalization is equity value, not book equity. Reconcile enterprise value to equity value plus debt and other capital claims, less the cash and nonoperating assets your chosen convention deducts. Use consistent treatment of leases, preferred stock and noncontrolling interests. Enter an audited EV in the worksheet rather than assuming that an unrelated provider multiple uses the same definition.
Three companies, different candidates
The worksheet starts with three hypothetical peers in USD millions over one common twelve-month period. All have interest included in CFO, a 25% interest tax rate and no CFO adjustment. Company A has CFO 120, capex 40, market cap 1,000, EV 1,400, interest 20 and net borrowing 0. Company B has 90, 30, 600, 1,500, 40 and −20 respectively. Company C has 30, 50, 400, 300, 0 and 10.
At the illustrative 7% floor, CFO less capex yields are 8%, 10% and −5%: A and B qualify. FCFE yields are 8%, 6.67% and −2.5%: only A qualifies after B repays debt. FCFF yields are 6.79%, 6% and −6.67%: none qualify. B leads the first ranking while A leads the firm-cash-flow ranking. The threshold is a demonstration, not a recommended valuation rule.
Use a candidate list for research
- Set country, sector and market capitalization in the API screen. FCF yield and P/FCF filters apply only after the initial sample arrives. Keep the sample limit in mind when interpreting empty results.
- Pick three comparable nonfinancial companies. Use the same fiscal or trailing period and a common valuation date in the worksheet. Record filing URLs, line items and adjustments; a high yield caused by a one-off working-capital release may not repeat.
- Save the comparison CSV with candidate flags. Review debt maturities, maintenance spending, dilution and several years of cash conversion. CFO is affected by working capital and noncash addbacks, so it is not immune to accounting judgments. A negative P/FCF is not a bargain multiple.
- Use AI Finance Agent to retrieve cash flow statements and inspect source data. Its cash-flow tools expose reporting dates and cash-flow items, but you must confirm the issuer reconciliation. Open the selected symbols in Market Screener for supported technical fields, then review each TradingView chart. This worksheet does not install an FCFF filter in that product.
Source review: October 18, 2026. This tool supports financial research and does not provide investment advice. A screening match is not a recommendation to buy.