Fabry-Perot interferometer is often used for the micro-displacement, because of its common optical path structure being insensitive to the environmental disturbances. Recently, the folded Fabry-Perot interferometer has been investigated for displacement measurements in large ranges. The advantages of a folded Fabry-Perot interferometer are insensitive to the tilt angle and higher optical resolution. But the design of the optical cavity has become more and more complicated. For this reason, the intensity loss in the cavity will be an important parameter for the distribution of the interferometric intensity. To obtain a more accurate result of such interferometer utilized for displacement measurements, the intensity loss of the cavity in the fabricated folded Fabry-Perot interferometer and the modified equation of the folded Fabry-Perot interferometer will be described. According to the theoretical and experimental results, the presented model is available for the analysis of displacement measurements by a folded Fabry-Perot interferometer.

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