{"id":999971115,"date":"2025-03-22T09:45:38","date_gmt":"2025-03-22T02:45:38","guid":{"rendered":"https:\/\/bizzi.vn\/?p=999971115"},"modified":"2026-06-09T13:40:42","modified_gmt":"2026-06-09T06:40:42","slug":"what-is-free-cash-flow-fcf","status":"publish","type":"post","link":"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/","title":{"rendered":"What is Free Cash Flow? 10 Benefits of Using Free Cash Flow"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Free cash flow (FCF) is an important indicator that reflects the ability to generate cash after paying the necessary expenses for business operations. Understanding what free cash flow is will help businesses be flexible in paying debt, investing, and paying dividends.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Let&#039;s learn about the role and effective management of free cash flow in business through this article of <a href=\"https:\/\/bizzi.vn\/\"><strong>Bizzi <\/strong><\/a>ok<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Index<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewbox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewbox=\"0 0 24 24\" version=\"1.2\" baseprofile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Hieu_ro_dong_tien_tu_do_la_gi_trong_tai_chinh_doanh_nghiep\" >Understand what free cash flow is in corporate finance?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Tim_hieu_dac_diem_cua_dong_tien_tu_do\" >Learn the characteristics of free cash flow<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Vai_tro_va_y_nghia_cua_viec_phan_tich_dong_tien_tu_do\" >The role and significance of free cash flow analysis<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Y_nghia_cua_dong_tien_tu_do_voi_doanh_nghiep\" >The Meaning of Free Cash Flow for Business<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Y_nghia_cua_dong_tien_tu_do_voi_nha_dau_tu\" >The Meaning of Free Cash Flow for Investors<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Cong_thuc_va_cach_tinh_dong_tien_tu_do_chinh_xac\" >Formula and how to calculate free cash flow correctly<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Cong_thuc_1_Tu_dong_tien_hoat_dong\" >Formula 1 (From operating cash flow)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Cong_thuc_2_Tu_loi_nhuan_sau_thue\" >Formula 2 (From profit after tax)<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Cac_buoc_co_ban_trong_chiet_khau_dong_tien_tu_do_la_gi\" >What are the basic steps in discounted free cash flow?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Nhung_han_che_khi_su_dung_dong_tien_tu_do\" >Limitations of using free cash flow<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Lam_the_nao_de_cai_thien_dong_tien_tu_do_cho_doanh_nghiep\" >How to improve free cash flow for business?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Tang_dong_tien_tu_hoat_dong_kinh_doanh_OCF\" >Increase operating cash flow (OCF)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Quan_ly_von_luu_dong_hieu_qua\" >Effective working capital management<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Toi_uu_hoa_chi_tieu_von_CapEx\" >Optimize capital expenditure (CapEx)<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Quan_ly_tai_chinh_hieu_qua_voi_Bizzi\" >Manage your finances effectively with Bizzi<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Cac_tinh_nang_noi_bat_cua_Bizzi\" >Outstanding features of Bizzi:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Loi_ich_cua_viec_su_dung_Bizzi_%E2%80%93_Cong_cu_quan_ly_dong_tien_tu_do_dac_luc_danh_cho_doanh_nghiep\" >Benefits of using Bizzi \u2013 A powerful free cash flow management tool for businesses<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Tu_dong_hoa_quy_trinh_quan_ly_chi_phi_toi_uu_dong_tien\" >Automate cost management processes, optimize cash flow:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Cai_thien_dong_tien_tu_do_FCF_nho_kiem_soat_chi_tieu_chat_che\" >Improve free cash flow (FCF) through tight expense control:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Tich_hop_linh_hoat_voi_he_thong_ke_toan_va_ERP\" >Flexible integration with accounting and ERP systems<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/bizzi.vn\/en\/what-is-free-cash-flow-fcf\/#Ho_tro_ra_quyet_dinh_tai_chinh_thong_minh\" >Support smart financial decision making<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Hieu_ro_dong_tien_tu_do_la_gi_trong_tai_chinh_doanh_nghiep\"><\/span><strong>Understand what free cash flow is in corporate finance?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<blockquote>\n<p class=\"ng-star-inserted\"><em><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Free Cash Flow (FCF)<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0FCF is the amount of cash left over after a company has subtracted its capital expenditures (CapEx) from its operating cash flow (OCF). In other words, FCF represents the amount of money a company has at its disposal after ensuring that its core operations are maintained and growing. This money can be used to pay down debt, pay dividends, buy back shares, or reinvest in new opportunities.<\/span><\/em><\/p>\n<\/blockquote>\n<p class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">FCF is considered a more accurate measure of <strong>profitability<\/strong> cash versus net income, as it eliminates the effects of non-cash accounting factors (such as depreciation) and directly reflects the amount of cash available.<\/span><\/p>\n<figure id=\"attachment_999971116\" aria-describedby=\"caption-attachment-999971116\" style=\"width: 1200px\" class=\"wp-caption aligncenter\"><img fetchpriority=\"high\" decoding=\"async\" class=\"wp-image-999971116\" title=\"Understanding what free cash flow is helps evaluate financial performance\" src=\"https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/dong-tien-tu-do-la-gi.jpg\" alt=\"Understanding what free cash flow is helps evaluate financial performance\" width=\"1200\" height=\"800\" srcset=\"https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/dong-tien-tu-do-la-gi.jpg 768w, https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/dong-tien-tu-do-la-gi-300x200.jpg 300w, https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/dong-tien-tu-do-la-gi-18x12.jpg 18w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" \/><figcaption id=\"caption-attachment-999971116\" class=\"wp-caption-text\">Understanding what free cash flow is helps evaluate financial performance<\/figcaption><\/figure>\n<h2><span class=\"ez-toc-section\" id=\"Tim_hieu_dac_diem_cua_dong_tien_tu_do\"><\/span><strong>Learn the characteristics of free cash flow<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"\" data-start=\"211\" data-end=\"380\">After understanding what free cash flow is, businesses need to grasp the important characteristics of this financial indicator to use it effectively in management and development strategy.<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Free cash flow can be negative or positive.<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">If FCF is positive, the business has enough money to expand, pay dividends, or reduce debt. Conversely, the business is spending more money than it generates, possibly due to heavy investment in assets or financial difficulties.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Flexibility<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Businesses can use FCF for a variety of purposes such as debt repayment, <strong>make long term investments,<\/strong> pay dividends or buy back shares.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Not displayed directly<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">FCF is not an indicator that appears directly in the <strong>corporate financial report<\/strong> according to GAAP or IFRS standards, but can be calculated from figures in the cash flow statement and income statement.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Not affected by accounting factors<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Unlike net income and EBITDA, FCF is not affected by accounting factors such as depreciation, provisions or other accounting adjustments.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Subject to change<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">If a company changes its investment strategy or experiences fluctuations in its working capital management, what is the role of free cash flow? It can change. For example, during an expansion phase, FCF can decrease due to a company investing heavily in assets (increased CapEx). Conversely, during a stabilization phase, FCF can increase due to a decrease in capital expenditures.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Important in business valuation<\/b><\/li>\n<\/ul>\n<p class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Financial analysts often use <\/span><span class=\"ng-star-inserted\">free cash flow in valuation<\/span><span class=\"ng-star-inserted\">\u00a0through model\u00a0<\/span><strong><span class=\"ng-star-inserted\">discounted free cash flow (DCF)<\/span><\/strong><span class=\"ng-star-inserted\"><strong>\u00a0<\/strong>to estimate the intrinsic value of the company.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Vai_tro_va_y_nghia_cua_viec_phan_tich_dong_tien_tu_do\"><\/span><strong>The role and significance of free cash flow analysis<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Understanding the role and significance of free cash flow helps businesses evaluate their financial performance, autonomy and long-term growth potential. Below are the key roles of free cash flow analysis. <strong>FCF<\/strong>:<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Y_nghia_cua_dong_tien_tu_do_voi_doanh_nghiep\"><\/span>The Meaning of Free Cash Flow for Business<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Financial Health Assessment:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Consistent positive FCF is a strong indicator of financial independence, sustainable profitability and low dependence on external funding.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Support capital allocation decisions:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Help management decide what to use the money for: paying down debt to reduce interest expenses, paying dividends to attract investors, buying back shares to increase value, or reinvesting in R&amp;D, M&amp;A for growth.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Financial planning and forecasting:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0FCF is an important basis for budgeting, forecasting the ability to pay future obligations and building long-term financial strategies.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Measuring investment performance:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Compare FCF generated with the amount<strong> capital investment (CapEx)<\/strong> helps evaluate the effectiveness of fixed asset investment projects.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Financial risk management:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Businesses with strong FCF will have better buffers to deal with economic fluctuations or unexpected events.<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Y_nghia_cua_dong_tien_tu_do_voi_nha_dau_tu\"><\/span>The Meaning of Free Cash Flow for Investors<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Business Valuation:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0<\/span><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Valuation by FCF<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0(via DCF model) is considered one of the reliable methods to determine the real value of a stock, based on its ability to generate cash in the future.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Earnings quality assessment:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0FCF helps investors look beyond accounting profit figures to assess whether those profits are actually converted into cash.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Assessing the ability to pay dividends and buy back shares:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0FCF is the primary source for sustainable dividend payments and share buyback programs.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Financial risk assessment:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Companies with strong FCF typically have lower debt ratios and are less likely to default. Investors should carefully consider the reasons if\u00a0<\/span><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">negative free cash flow<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0lengthen.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Identify investment opportunities:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Companies with consistently growing FCF are often attractive investments over the long term.<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Cong_thuc_va_cach_tinh_dong_tien_tu_do_chinh_xac\"><\/span><strong>Formula and how to calculate free cash flow correctly<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">What is the discounted free cash flow method? Understanding this helps determine the intrinsic value of a business based on its future cash-generating potential. <\/span><span class=\"ng-star-inserted\">There are two\u00a0<\/span><span class=\"ng-star-inserted\">Free Cash Flow (FCF) Formula<\/span><span class=\"ng-star-inserted\">\u00a0popular:<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Cong_thuc_1_Tu_dong_tien_hoat_dong\"><\/span><b>Formula 1 (From operating cash flow)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><b>FCF = OCF (Net Cash Flow) \u2013 CAPEX (Capital Expenditure).<\/b><\/p>\n<ul>\n<li style=\"list-style-type: none;\"><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">OCF (Operating Cash Flow \u2013 Cash flow from business activities):<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Is the amount of cash generated from a company&#039;s core business activities. This figure is taken directly from\u00a0<\/span><span class=\"ng-star-inserted\">Cash Flow Statement<\/span><span class=\"ng-star-inserted\">.\u00a0<\/span><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">What is OCF?<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0It reflects money received from customers minus money paid to suppliers, employees and other operating expenses.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">CapEx (Capital Expenditures):<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Is the amount of money a business spends to purchase, maintain or upgrade long-term fixed assets such as factories, machinery and equipment.\u00a0<\/span><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">What is CapEx?<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0It is usually calculated by taking the ending Fixed Assets (PPE) minus the beginning PPE, then adding back the Depreciation for the period (taken from the Cash Flow Statement or Income Statement).<\/span>\n<ul class=\"ng-star-inserted\">\n<li class=\"ng-star-inserted\">\n<p class=\"ng-star-inserted\"><em><span class=\"ng-star-inserted\">CapEx = Ending PPE \u2013 Beginning PPE + Depreciation during the period<\/span><\/em><\/p>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">For example:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Company A has OCF of 15 billion VND and CapEx in the period is 4 billion VND. So FCF = 15 \u2013 4 = 11 billion VND.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Cong_thuc_2_Tu_loi_nhuan_sau_thue\"><\/span><b>Formula 2 (From profit after tax)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><b>FCF = Net Income (NI) + Depreciation &amp; Amortization \u2013 Change in Net Working Capital* \u2013 CapEx<br \/>\n<\/b><\/p>\n<ul>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Net Income (NI):<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Taken from the Income Statement.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Depreciation &amp; Amortization:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Non-cash expenses, added together.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Change in Net Working Capital:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Reflects the change in investment in current assets (such as Accounts Receivable, Inventory) minus Current Liabilities (such as Accounts Payable). If working capital increases (for example, inventory increases), it will decrease cash flow, and vice versa.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">CapEx:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Calculate as above.<\/span><\/li>\n<\/ul>\n<p class=\"ng-star-inserted\"><span class=\"ng-star-inserted\"><em>Note:<\/em> Change in Net Working Capital = (Ending Current Assets \u2013 Ending Current Liabilities) \u2013 (Beginning Current Assets \u2013 Beginning Current Liabilities). The minus sign before it in the FCF formula means that if working capital increases, FCF decreases, and vice versa.<\/span><\/p>\n<figure id=\"attachment_999971117\" aria-describedby=\"caption-attachment-999971117\" style=\"width: 1200px\" class=\"wp-caption aligncenter\"><img decoding=\"async\" class=\"wp-image-999971117\" title=\"Free cash flow formula to determine intrinsic value of a business\" src=\"https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/cach-tinh-dong-tien-tu-do.jpg\" alt=\"Free cash flow formula to determine intrinsic value of a business\" width=\"1200\" height=\"594\" srcset=\"https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/cach-tinh-dong-tien-tu-do.jpg 1194w, https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/cach-tinh-dong-tien-tu-do-300x148.jpg 300w, https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/cach-tinh-dong-tien-tu-do-1024x507.jpg 1024w, https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/cach-tinh-dong-tien-tu-do-768x380.jpg 768w, https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/cach-tinh-dong-tien-tu-do-18x9.jpg 18w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" \/><figcaption id=\"caption-attachment-999971117\" class=\"wp-caption-text\">Free cash flow formula to determine intrinsic value of a business<\/figcaption><\/figure>\n<h2><span class=\"ez-toc-section\" id=\"Cac_buoc_co_ban_trong_chiet_khau_dong_tien_tu_do_la_gi\"><\/span><strong>What are the basic steps in discounted free cash flow?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">FCF Forecast:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Estimate FCF for the coming years (usually 5-10 years).<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Calculate the weighted average cost of capital (WACC):<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Determine an appropriate discount rate that reflects the risk of the business. WACC is the average cost of capital (debt and equity).<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Calculate Terminal Value (TV):<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Estimate the value of all FCF after the forecast period.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Discount FCF and TV to present:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0Bring future cash flows to present value using WACC.<\/span><\/li>\n<li class=\"ng-star-inserted\"><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Calculate Enterprise Value (EV) and Equity Value:<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0The sum of the present value of FCF and TV is EV. Subtract Net Debt to get Equity Value.<\/span><\/li>\n<\/ul>\n<p><b>Formula: WACC = Rd \u00d7 Fd \u00d7 (1 \u2013 t) + Re \u00d7 Fe.<\/b><\/p>\n<p><i><span style=\"font-weight: 400;\">In there:<\/span><\/i><\/p>\n<ul>\n<li><i><span style=\"font-weight: 400;\">Rd: Cost of debt of the enterprise.<\/span><\/i><\/li>\n<li><i><span style=\"font-weight: 400;\">Fd: Ratio of long-term debt to total long-term capital.<\/span><\/i><\/li>\n<li><i><span style=\"font-weight: 400;\">t: Corporate income tax rate.<\/span><\/i><\/li>\n<li><i><span style=\"font-weight: 400;\">Re: Cost of equity.<\/span><\/i><\/li>\n<li><i><span style=\"font-weight: 400;\">Fe: Ratio of equity to total long-term capital.<\/span><\/i><\/li>\n<li><span style=\"font-weight: 400;\">Step 3: Forecast terminal value (TV).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Step 4: Calculate <strong><a href=\"https:\/\/bizzi.vn\/gia-tri-doanh-nghiep-la-gi\/\">Enterprise value<\/a><\/strong>.<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Nhung_han_che_khi_su_dung_dong_tien_tu_do\"><\/span><strong>Limitations of using free cash flow<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Impact on working capital and capital expenditure: <\/b><span style=\"font-weight: 400;\">Changes in working capital and capital expenditures can have a strong impact on free cash flow (FCF).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>No forecast of profitability:<\/b><span style=\"font-weight: 400;\"> FCF cannot predict future earnings growth or maintenance.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Complex calculations: <\/b><span style=\"font-weight: 400;\">Calculating FCF requires careful analysis of factors such as pre-tax profit, changes in working capital, capital expenditures and taxes.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Difficult to compare across industries:<\/b><span style=\"font-weight: 400;\"> FCF can be difficult to compare across businesses in different industries.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>High free cash flow is not always good and vice versa:<\/b><span style=\"font-weight: 400;\"> High FCF is sometimes a sign that a company is not investing enough in its business. And if FCF is negative, it may be that the company is investing heavily to expand its market share.<\/span><\/li>\n<\/ul>\n<h2 class=\"ng-star-inserted\"><span class=\"ez-toc-section\" id=\"Lam_the_nao_de_cai_thien_dong_tien_tu_do_cho_doanh_nghiep\"><\/span><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">How to improve free cash flow for business?<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">To\u00a0<\/span><span class=\"ng-star-inserted\">improve FCF<\/span><span class=\"ng-star-inserted\">, businesses can focus on the following aspects:<\/span><\/p>\n<h3 class=\"ng-star-inserted\"><span class=\"ez-toc-section\" id=\"Tang_dong_tien_tu_hoat_dong_kinh_doanh_OCF\"><\/span><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Increase operating cash flow (OCF)<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Increase revenue (expand market, launch new products, increase reasonable selling prices).<\/span><\/li>\n<li class=\"ng-star-inserted\"><span class=\"ng-star-inserted\"><strong>Optimize cost of capital<\/strong> sales (find better suppliers, improve manufacturing processes).<\/span><\/li>\n<li class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Tight control of operating expenses (OpEx): C<\/span><span class=\"ng-star-inserted\">Reducing unnecessary expenses, automating processes to reduce labor costs, and managing budgets effectively will directly increase OCF.<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Quan_ly_von_luu_dong_hieu_qua\"><\/span><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Effective working capital management<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Collect receivables faster.<\/span><\/li>\n<li class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Optimize inventory levels (avoid over or under inventory).<\/span><\/li>\n<li class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Negotiate to extend payment terms with suppliers (within reasonable limits).<\/span><\/li>\n<\/ul>\n<h3 class=\"ng-star-inserted\"><span class=\"ez-toc-section\" id=\"Toi_uu_hoa_chi_tieu_von_CapEx\"><\/span><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Optimize capital expenditure (CapEx)<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Only invest in projects with high profitability (positive ROI, NPV).<\/span><\/li>\n<li class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Carefully evaluate investment needs to avoid waste.<\/span><\/li>\n<li class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Consider leasing options instead of buying assets if it is more efficient.<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Quan_ly_tai_chinh_hieu_qua_voi_Bizzi\"><\/span>Manage your finances effectively with Bizzi<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Use <\/span><span style=\"font-weight: 400;\">cash flow management tools<\/span><span style=\"font-weight: 400;\"> Modern solutions help businesses effectively address cost and budget issues. Bizzi is one such example. <\/span><strong><a href=\"https:\/\/bizzi.vn\/phan-mem-quan-ly-tai-chinh-doanh-nghiep\/\">business financial management tools<\/a><\/strong><span style=\"font-weight: 400;\"> leading solution today, providing automation solutions for business expense reporting processes, easy to track and <\/span><span style=\"font-weight: 400;\">Cash flow management<\/span><span style=\"font-weight: 400;\"> smartly without spending much time and effort.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Cac_tinh_nang_noi_bat_cua_Bizzi\"><\/span><strong>Outstanding features of Bizzi:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Track and <\/b><b>Real-time cost management<\/b><b>: <\/b><span style=\"font-weight: 400;\">The system updates transactions and expenses as they occur, helping managers stay on top of the company&#039;s financial situation in real time.<\/span><\/li>\n<li><b>Cost and budget reporting dashboard:<\/b><span style=\"font-weight: 400;\"> Intuitive interface, automatic reporting, easy to track spending and budget in real time.<\/span><\/li>\n<li><b>Set spending policy:<\/b> Customize by department\/project, control limits and warn when spending exceeds.<\/li>\n<li><b>Flexible expense approval process: <\/b><span style=\"font-weight: 400;\">Approval flows are set up based on level and expense type, users can request configuration design to meet internal needs, ensuring approval processes are done quickly, anytime, anywhere.<\/span><\/li>\n<li><b>Budgeting for departments and projects: <\/b><span style=\"font-weight: 400;\">Bizzi helps businesses allocate and manage detailed budgets for each department, project, or specific spending category.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><a href=\"https:\/\/bizzi.vn\/tich-hop-erp\/\"><b>ERP integration<\/b><\/a><span style=\"font-weight: 400;\">: Bizzi seamlessly integrates with major ERP systems, helping to synchronize cost and budget data from multiple sources into one platform.<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Loi_ich_cua_viec_su_dung_Bizzi_%E2%80%93_Cong_cu_quan_ly_dong_tien_tu_do_dac_luc_danh_cho_doanh_nghiep\"><\/span><strong>Benefits of using Bizzi \u2013 A powerful free cash flow management tool for businesses<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"Tu_dong_hoa_quy_trinh_quan_ly_chi_phi_toi_uu_dong_tien\"><\/span><strong>Automate cost management processes, optimize cash flow:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Minimize manual operations, automate invoice and document processing, helping businesses reduce data entry time by 80%.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Optimize operating costs, eliminate traditional paperwork, reduce errors and save accounting staff.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Standardize approval and spending processes flexibly, helping to control budget effectively.<\/span><\/li>\n<\/ul>\n<figure id=\"attachment_999971118\" aria-describedby=\"caption-attachment-999971118\" style=\"width: 1200px\" class=\"wp-caption aligncenter\"><img decoding=\"async\" class=\"wp-image-999971118\" title=\"Bizzi is a business financial management software that automates cost management processes and optimizes cash flow.\" src=\"https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/Phan-mem-quan-ly-tai-chinh-doanh-nghiep-Bizzi-Expense-.png\" alt=\"Bizzi is a business financial management software that automates cost management processes and optimizes cash flow.\" width=\"1200\" height=\"885\" srcset=\"https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/Phan-mem-quan-ly-tai-chinh-doanh-nghiep-Bizzi-Expense-.png 1024w, https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/Phan-mem-quan-ly-tai-chinh-doanh-nghiep-Bizzi-Expense--300x221.png 300w, https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/Phan-mem-quan-ly-tai-chinh-doanh-nghiep-Bizzi-Expense--768x566.png 768w, https:\/\/bizzi.vn\/wp-content\/uploads\/2025\/03\/Phan-mem-quan-ly-tai-chinh-doanh-nghiep-Bizzi-Expense--16x12.png 16w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" \/><figcaption id=\"caption-attachment-999971118\" class=\"wp-caption-text\">Bizzi is a business financial management software that automates cost management processes and optimizes cash flow.<\/figcaption><\/figure>\n<h3><span class=\"ez-toc-section\" id=\"Cai_thien_dong_tien_tu_do_FCF_nho_kiem_soat_chi_tieu_chat_che\"><\/span><b>Improve free cash flow (FCF) through tight expense control:<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Real-time expense tracking<\/b><span style=\"font-weight: 400;\">: Automatic reports help businesses control costs instantly, thereby optimizing free cash flow (<\/span><b>FCF) <\/b><span style=\"font-weight: 400;\">positive.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Reduce budget loss<\/b><span style=\"font-weight: 400;\">: Verify transactions and control invalid charges instantly.<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Tich_hop_linh_hoat_voi_he_thong_ke_toan_va_ERP\"><\/span><b>Flexible integration with accounting and ERP systems<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Easily connect with accounting software such as MISA, SAP, Oracle, helping to automatically synchronize cost data.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">E-invoice integration: Supports electronic invoice processing, reduces errors and increases transparency.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Multi-platform management: Use on mobile &amp; web, convenient for businesses with many branches.<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Ho_tro_ra_quyet_dinh_tai_chinh_thong_minh\"><\/span><b>Support smart financial decision making<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Detailed, intuitive reports: Provide financial analysis by department and project, helping managers easily adjust budgets.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Optimizing FCF for reinvestment: By effectively controlling expenses, businesses can increase FCF to expand their business without borrowing.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Improve supplier relationships: Pay on time, take advantage of better deals and discounts.<\/span><\/li>\n<\/ul>\n<p class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">Clearly understand\u00a0<\/span><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">What is free cash flow?<\/span><\/strong><span class=\"ng-star-inserted\">,\u00a0<\/span><strong class=\"ng-star-inserted\"><span class=\"ng-star-inserted\">How to calculate FCF<\/span><\/strong><span class=\"ng-star-inserted\">\u00a0and influencing factors are the foundation for effective corporate financial management. FCF is not only a measure of financial \u201chealth\u201d but also a guideline for investment decisions, debt repayment and profit distribution.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Bizzi is a powerful support tool that helps businesses manage and optimize free cash flow (FCF), ensuring strong finances for sustainable development.<\/span><\/p>\n<p><b><i>Sign up for a free trial now at: <\/i><\/b><a href=\"https:\/\/bizzi.vn\/dang-ky-dung-thu\/\"><b><i>https:\/\/bizzi.vn\/dang-ky-dung-thu\/<\/i><\/b><\/a><\/p>\n<p><strong>Read more:<\/strong><\/p>\n<ul>\n<li><a href=\"https:\/\/bizzi.vn\/bien-phap-quan-tri-dong-tien-hieu-qua\/\"><strong>How to plan and manage cash flow effectively<\/strong><\/a><\/li>\n<li><a href=\"https:\/\/bizzi.vn\/tong-hop-nhung-cach-giup-toi-uu-hoa-chi-phi-trong-doanh-nghiep\/\"><strong>How to optimize finance in business<\/strong><\/a><\/li>\n<\/ul>","protected":false},"excerpt":{"rendered":"<p>Free cash flow (FCF) is an important indicator that reflects the ability to generate cash after paying expenses\u2026<\/p>","protected":false},"author":56,"featured_media":999971116,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","inline_featured_image":false,"footnotes":""},"categories":[76],"tags":[],"class_list":["post-999971115","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-goc-nhin-cfo"],"acf":[],"_links":{"self":[{"href":"https:\/\/bizzi.vn\/en\/wp-json\/wp\/v2\/posts\/999971115","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bizzi.vn\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bizzi.vn\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bizzi.vn\/en\/wp-json\/wp\/v2\/users\/56"}],"replies":[{"embeddable":true,"href":"https:\/\/bizzi.vn\/en\/wp-json\/wp\/v2\/comments?post=999971115"}],"version-history":[{"count":14,"href":"https:\/\/bizzi.vn\/en\/wp-json\/wp\/v2\/posts\/999971115\/revisions"}],"predecessor-version":[{"id":999971784,"href":"https:\/\/bizzi.vn\/en\/wp-json\/wp\/v2\/posts\/999971115\/revisions\/999971784"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bizzi.vn\/en\/wp-json\/wp\/v2\/media\/999971116"}],"wp:attachment":[{"href":"https:\/\/bizzi.vn\/en\/wp-json\/wp\/v2\/media?parent=999971115"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bizzi.vn\/en\/wp-json\/wp\/v2\/categories?post=999971115"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bizzi.vn\/en\/wp-json\/wp\/v2\/tags?post=999971115"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}