This Funds From Operations Excel Template is an educational resource and has a sample calculation of FFO. FFO represent the amount of cash that is generated from the core business operations. This is an important metric to calculate as it is the core cash flow that a company can generate from its business. Fund from operations are particularly useful for companies that engage in Real Estate Investment Trusts (REITs), which are trusts that primarily operated on income-generating real estate transactions. Funds from operations is the actual amount of cash flow a company generates from its operations. It excludes all the expenses or loss which are not incurred from its operating activities, such as depreciation and amortization (D&A), gains or losses from the sale of assets, and interest income.
Formula for Funds From OperationsThe Formula for FFO is as follows: FFO = Net Income + (Depreciation expense + Amortization expense + Losses on sale of assets) – (Gains on sale of assets + Interest income)
Importance of FFO in Real EstateFFO is an important indicator of the operational efficiency for REIT companies. It is often used by investors as a benchmark for measuring financial performance of a real estate company.
Learn More About This TopicRead CFI's guide on FFO to have a better grasp of its definition, application, and importance!