TTM Cash Flow to Firm

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Formula

TTM Cash Flow to Firm = TTM Cash from Operating Activities + TTM Interest Expense × (1 − TTM Effective Tax Rate)

Source

Calculated by GeminIQ from figures reported in SEC filings

TTM cash flow to firm is the operating cash a company generated over the trailing twelve months before any payments to lenders, commonly calculated as TTM operating cash flow plus TTM after-tax interest expense. It measures the cash the business produces for all of its capital providers, debt and equity together, before it spends anything on new capital assets.

It is not a figure companies report and not a GAAP line item. It is calculated from figures reported in SEC filings, and definitions vary somewhat between analysts and data providers.

The adjustment exists because of how US GAAP classifies interest. Under ASC 230, cash paid for interest is an operating cash flow, so reported operating cash flow (NetCashProvidedByUsedInOperatingActivities in XBRL) has already been reduced by it. A company with more debt therefore shows lower operating cash flow than an otherwise identical company with none. Adding back interest, net of the tax saving it created, removes that financing effect. The interest input is income-statement interest expense (InterestExpense), and the tax rate is TTM income tax expense divided by TTM pretax income.

Each input is summed over the four most recent quarters. Operating cash flow in a 10-Q is reported year to date, so quarterly amounts come from differencing, and the fourth quarter equals the 10-K annual figure minus the nine-month figure from the third-quarter 10-Q. Interest expense on the income statement is not identical to interest actually paid in cash, which companies disclose separately. Some analysts use cash interest paid instead, which is a legitimate variation.

Because it excludes the effect of leverage, TTM cash flow to firm pairs naturally with enterprise value, which also covers both debt and equity. EV divided by cash flow to firm is a financing-neutral cash valuation multiple. Subtracting TTM capital expenditures gives TTM free cash flow to the firm, the input to an unlevered discounted cash flow model.