Funds from Operations

Definition

Funds From Operations is similar to free cash flow. It describes the amount of income a company produces before deprecation expenses and income tax.

It differs from EBITDA because it does not exclude interest expenses.

FFO is frequently used to assess the income producing potential of real estate investment trust (REIT).

Formula

There are many different ways to calculate FFO. YCharts calculates it as:

Funds From Operations = Pretax Income + Depreciation and Amortization + Depletion

Another calculations of FFO is:

Funds From Operations = Net Income + Depreciation + Amortization - Gains on Sales of Property