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.
Related Business Content