What is the formula for calculating CFFA?

The formula for calculating Cash Flow from Assets (CFFA) is indeed represented by operating cash flow minus changes in net working capital (NWC) and net capital expenditures (Capex). This approach captures the cash generated by a firm's operations that is available to all investors (both debt and equity holders).

Operating cash flow reflects the cash generated from the company's core business operations. By subtracting changes in net working capital, we account for the cash required to fund day-to-day operations and manage current assets and liabilities. Additionally, subtracting net capital expenditures accounts for cash spent on long-term investments in fixed assets, which are essential for maintaining and growing the business.

This formula effectively summarizes the cash available for distribution to investors after the company has met its operating and capital obligations. Understanding CFFA is crucial because it helps in evaluating a company's financial health and its ability to generate cash flows over time.