[Verse 1] When a company earns its money each year We need to see what's really clear Not just the profit on the page But cash that flows at every stage Start with earnings before interest and tax Add depreciation, get the facts This operating cash will show What the business really knows [Chorus] Free Cash Flow to the Firm, FCFF Cash for everyone to see All the holders of the debt Equity owners, don't forget Take the operating cash today Minus capex that you pay Minus working capital change That's the formula, nothing strange FCFF, FCFF Cash available, can't you see [Verse 2] EBIT times one minus tax rate Plus depreciation, calculate That's your after-tax operating flow Now there's more you need to know Capital expenditures must go Subtract them from your cash flow New equipment, buildings too These investments we'll deduct through [Chorus] Free Cash Flow to the Firm, FCFF Cash for everyone to see All the holders of the debt Equity owners, don't forget Take the operating cash today Minus capex that you pay Minus working capital change That's the formula, nothing strange FCFF, FCFF Cash available, can't you see [Bridge] Working capital changes matter If it grows, your cash gets flatter Inventory, receivables rise Cash goes down before your eyes But if working capital shrinks More cash flows, better than you think This is why analysts love this tool Valuation's golden rule [Verse 3] Why do we calculate this way To value firms from day to day FCFF shows the total pie For all investors, that's no lie Bondholders and shareholders share This cash flow beyond compare Discount it back at WACC rate Enterprise value, calculate [Chorus] Free Cash Flow to the Firm, FCFF Cash for everyone to see All the holders of the debt Equity owners, don't forget Take the operating cash today Minus capex that you pay Minus working capital change That's the formula, nothing strange FCFF, FCFF Cash available, can't you see [Outro] From EBIT to the final sum FCFF shows where cash comes from Available to all who hold A stake in stories yet untold
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