Free Cash Flow To Sales

Posted in Finance, Accounting and Economics Terms, Total Reads: 406
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Definition: Free Cash Flow To Sales

Free cash flow (FCF) of a company is that amount which is available to equity and debt holders. This ratio specifies the FCF as a percentage of the total sales of the company.


Free cash flow to sales is calculated as follows

Free Cash Flow to Sales = Free cash flow/Sales


The total sales of a company in the given period are used here to calculate the ratio. 

It is difficult to manipulate the FCF of a company. This is usually used to understand how much of the total revenue of the company is effectively being converted into cash.

 

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