Funds From Operations (FFO)

Funds from operations refers to a company’s cash flow from its core business activities. It is calculated by taking the net income and adding back non-cash amounts such as depreciation and amortisation (non-cash expenses) as well as losses on asset sales (derived from the difference between the value stated in the financial statements and the sale price) that don’t result from normal business operations of a company (non-financial institution). Net gains from the sale of assets is deducted and net interest adjusted, as they do not relate to a company’s core underlying operations. Funds from Operations = Net income + Depreciation and Amortisation + Loss on asset sales - Gain on asset sales + Interest expense - Interest income