what is funds from operations ffo 
the term funds from operations ffo refers to the figure used by real estate investment trusts reits to define the cash flow from their operations real estate companies use ffo as a measurement of operating performance ffo is calculated by adding depreciation amortization and losses on sales of assets to earnings and then subtracting any gains on sales of assets and any interest income it is sometimes quoted on a per share basis the ffo per share ratio should be used in lieu of earnings per share eps when evaluating reits and other similar investment trusts investopedia sydney burnsformula and calculation of funds from operations ffo the formula for ffo is ffo ni d a psl psg ii where ffo funds from operations ni net income d depreciation a amortization psl property sales losses psg property sales gains ii interest income begin aligned text ffo text ni text d text a text psl text psg text ii textbf where text ffo text funds from operations text ni text net income text d text depreciation text a text amortization text psl text property sales losses text psg text property sales gains text ii text interest income end aligned ffo ni d a psl psg iiwhere ffo funds from operationsni net incomed depreciationa amortizationpsl property sales lossespsg property sales gainsii interest income all components of the ffo calculation are listed on a reit s income statement here are the steps to take to calculate it if for example a reit had depreciation of 20 000 gains on sales of property of 40 000 and net profit of 100 000 its ffo would be 80 000 in most situations you won t need to calculate a reit s ffo because all reits are required to show their ffo calculations on their public financial statements the ffo figure is typically disclosed in the footnotes for the income statement 