FCF Conversion
After maintenance CapEx, how much profit remains as free cash?
Definition
FCF Conversion measures how much of reported profit translates into free cash flow — cash available after capital expenditure. It is stricter than Cash Conversion because it accounts for reinvestment needs.
Two variants are used in Finsco:
- FCF / Net Income — earnings quality perspective
- FCF / OCF — capital intensity perspective (capital flow command)
Formula
Where
Interpretation
| Range | Assessment |
|---|---|
| > 80% | Excellent — low reinvestment needs, high cash generation |
| 50% – 80% | Good — moderate CapEx requirements |
| < 50% | Capital-intensive — significant reinvestment needed |
| < 0% | Cash negative — CapEx exceeds operating cash flow |
In Finsco
Computed by both audit earning-quality (FCF/NI) and audit capital-flow (FCF/OCF). The earning-quality advisory uses the median to resist outlier years.
Related Metrics
- Cash Conversion — OCF / Net Income (before CapEx)
- CapEx Intensity — CapEx / OCF