This funds from operations template allows you to calculate the FFO using the formula: FFO = Net Income + (Depreciation expense + Amortization expense + Losses on sale of assets) – (Gains on sale of assets + Interest income)
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Funds from operations (FFO), is the actual amount of cash flow generated from business operations.
In order to calculate the FFO, one must add the expenses or losses, which are not actually incurred from the operations, such as depreciation, amortization, and any losses on the sale of assets, to net income. Then subtract any gains on the sale of assets and interest income.
FFOs are commonly used by companies that engage in Real Estate Investment Trusts (REITs), a business that primarily operates on income-generating real estate transactions. REIT companies are involved in commercial real estate – selling, leasing, and financing of office and apartment buildings, warehouses, hospitals, shopping centers, hotels, and timberlands.
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