Self-financing capacity (CAF) 2026: calculation and optimisation
The CAF measures the cash a company generates through its activity. Calculation from EBITDA or net profit, a worked example, and levers to improve it to finance growth.
Expert note: This article was written by our chartered accountancy firm. Information is current as of 2026. For a personalised review of your situation, contact us.
Quick answer. Self-financing capacity (CAF) measures the potential cash generated by a company's activity over a financial year. It is calculated from gross operating profit, by adding the other cashable income and subtracting the other disbursable charges, or from net profit by adding back depreciation and provisions. A positive and growing CAF finances investments and the repayment of loans.
Self-financing capacity is one of the indicators most watched by banks and owners: it is the measure of the money the company generates by itself. A good CAF finances growth without depending solely on debt. Here is how to calculate it, with a worked example, and how to improve it.
What the CAF measures#
The CAF is the potential cash flow generated by operations, before financing and investment decisions.
It represents the cash the activity structurally generates, independently of the depreciation policy, which is a calculated charge with no cash outflow. It is this resource that serves to repay loans, invest and distribute dividends. A low or negative CAF signals a company that does not generate enough cash through its activity, which makes it dependent on external financing.
The CAF differs from net profit: a positive profit can coexist with a modest CAF, and vice versa, depending on the weight of non-cashable items.
The two calculation methods#
The CAF is calculated in two equivalent ways, from two different starting points.
The subtractive method starts from gross operating profit: you add the other cashable income and subtract the other disbursable charges. The additive method starts from net profit: you add back depreciation and provisions, subtract reversals, and neutralise gains or losses on disposals. Both methods reach the same amount, as both isolate the potential cash of operations. Reading the intermediate management balances eases this calculation.
A worked example#
Let us take a company to illustrate the additive method.
Its net profit is 40,000 euros. It recorded 25,000 euros of depreciation and 5,000 euros of provisions, that is 30,000 euros of calculated charges with no cash outflow. It has no reversal or disposal in the year. Its CAF is therefore 40,000 + 30,000, that is 70,000 euros. It is this sum, and not the profit of 40,000 euros alone, that measures the cash generated by the activity and available to repay debt or invest.
| Item | Amount |
|---|---|
| Net profit | 40,000 euros |
| Depreciation | 25,000 euros |
| Provisions | 5,000 euros |
| Self-financing capacity | 70,000 euros |
This gap between net profit and CAF explains why a very capital-intensive company, which depreciates a lot, can generate a CAF clearly higher than its profit.
The optimisation levers#
Improving the CAF goes through operations, not accounting.
The CAF is strengthened by raising operating profitability: improving margins, controlling charges, optimising the cost price as we detail in our article on the cost price calculation. Reducing disbursable charges and increasing cashable income acts directly on the CAF. Conversely, playing on depreciation does not change the CAF, since it is neutralised in its calculation: a CAF is not optimised by entries, but by real performance.
Our view#
The CAF is the arbiter of financial health: it is what says whether the company lives off its activity or its financing. A solid CAF opens access to credit, finances investments and secures the repayment of loans.
Our approach is to track the CAF over time, to compare it with the annual debt repayment to check that the company generates enough cash for its deadlines, and to work on its operating levers. A bank analysing a loan file looks at the CAF first: it measures the ability to repay, which makes it a key argument to obtain financing, alongside a Bpifrance guarantee. The CAF is built in operations, not in closing entries.
A common case#
An owner judged his company solid on the strength of a positive net profit, but struggled to meet his loan deadlines. The CAF analysis revealed that, once the calculated charges were neutralised, the cash actually generated barely covered the annual debt repayment. The diagnosis redirected the effort towards margins and the control of disbursable charges, the only real levers on the CAF. In one year, the CAF recovered, restoring room to invest and repay calmly.
Frequently asked questions
What is self-financing capacity?+
It is the potential cash generated by a company's activity over a year, before investment and financing decisions. It finances the repayment of loans, investments and dividends.
How is the CAF calculated?+
By the subtractive method, from gross operating profit increased by other cashable income and reduced by other disbursable charges; or by the additive method, from net profit by adding back depreciation and provisions.
What is the difference between CAF and net profit?+
The CAF neutralises calculated charges and income, with no cash flow, such as depreciation. A positive net profit can coexist with a modest CAF, and a company that depreciates a lot can have a CAF much higher than its profit.
How do you improve your CAF?+
By raising operating profitability: improving margins, controlling disbursable charges, optimising the cost price. Playing on depreciation does not change the CAF, as it is neutralised in its calculation.
Why does the bank look at the CAF?+
Because it measures the company's ability to repay its loans through its own activity. A CAF that comfortably covers the annual debt repayment reassures the lender and eases access to credit.
Is a negative CAF serious?+
It signals that the activity does not generate enough cash to cover its disbursable charges, which makes the company dependent on external financing. It is a warning sign that calls for a recovery of operations.
Key takeaways#
- The CAF measures the potential cash generated by the activity, before investment and financing.
- It is calculated from EBITDA (subtractive method) or net profit (additive method).
- It neutralises calculated charges such as depreciation, hence a gap with net profit.
- It finances the repayment of loans, investments and dividends.
- It improves through operations (margins, charges), not through accounting entries.
- The bank looks at it first, as it measures the ability to repay.
Article written by the Hayot Expertise firm, registered with the Order of Chartered Accountants of Ile-de-France. Updated for 2026. This article is for information purposes and does not replace an analysis of your own situation.
Article written by Samuel HAYOT
Chartered Accountant, registered with the Institute of Chartered Accountants.
Regulated French accounting and audit firm based in Paris 8, built to support companies across France with a digital and decision-oriented approach.
Sources
Official and operational sources cited for this page.
This topic is part of our service Tax accountant in Paris | CIT, VAT & tax audits
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