Definition
Free cash flow represents cash the company can use for dividends, buybacks, debt repayment, or growth investments. It's considered a truer measure of profitability than earnings because it's harder to manipulate and reflects actual cash generation.
Formula
FCF = Operating Cash Flow - Capital Expenditures
Example
With $60M operating cash flow and $25M capex, FCF is $35M. This is cash available to return to shareholders or reinvest beyond maintenance needs.
FAQ
What is Free Cash Flow (FCF)?
Cash available after funding operations and capital expenditures.
How do you calculate Free Cash Flow (FCF)?
A common formula for Free Cash Flow (FCF) is: FCF = Operating Cash Flow - Capital Expenditures
Why is Free Cash Flow (FCF) important?
Free Cash Flow (FCF) helps investors evaluate financial statements and make more informed decisions.