This cash flow asks us to calculate the free cash flow for the below company So we've got a starting figure of EBIT, we've then got D&A, tax rate, capex and a increase or decrease in operating working capital Let's try and put them all into the right order to get to free cash flow So I'm going to start with EBITDA, but what I really need to get to is EBIT So I'm going to subtract depreciation and amortization as expenses And that now gets me to an EBIT of 70 Now from EBIT I want to get to NOPAT (net operating profit after tax) Which means I need to calculate tax on EBIT, so I can see my tax rate is 30% on the 70 I times that by minus one to show that as a negative So my NOPAT (net operating profit after tax) is 49 But the only reason we subtracted depreciation and amortization earlier was to get the right tax figure We now say, is that a cash flow? No it includes non cash flows Quickly quickly, add back the depreciation and amortization Few, that's a bit closer to a cash flow So if I've added back the non cash depreciation and amortization What other cash flows do I generally need to take off? Well capex, that is a genuine cash flow. And it's going to be a negative because it's a cash outflow We've also had an increase in operating working capital, you might imagine that we bought some inventory Well that's an outflow of cash, so that's a 10 negative I've now got everything I need to calculate free cash flow I take my NOPAT, add back the D&A subtract capex, subtract that cash outflow for operating working capital Which now gets me to my eventual free cash flow of 29