What you can own
Funds from operations
Also called FFO
A property-company profit measure that adds back depreciation, since buildings often appreciate.
How it works
Standard accounting depreciates buildings towards zero, which understates the earnings of a business whose assets frequently hold or gain value. FFO reverses that.
Adjusted FFO goes further, subtracting recurring maintenance spending, and is closer to distributable cash.
Formula
FFO = net income + depreciation and amortisation − gains on property salesRelated terms
- REITA listed company owning income-producing property, required to pay out most of its profits.
- Depreciation and amortisationSpreading the cost of a long-lived asset across the years it is used, rather than expensing it at once.
- Free cash flowCash left over after paying for the investment needed to maintain and grow the business.
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