Funds from operations (FFO) is the term that investors use to describe the cash flow of a real estate company or a real estate investment trust (REIT).
[1] FFO is a performance indicator created by the National Association of Real Estate Investment Trusts (NAREIT) that is recognized by the SEC to be the standard non-GAAP gauge of financial performance for the real estate sector.
Analysts calculate the standard version of FFO by adding amortization and depreciation to net income, and subtracting any gains made on the sale of assets.
Investors can use the FFO to determine the financial performance of a real estate company.
Often, the FFO is divided by a per-share basis for securities that are publicly traded.