Free Cash Flow (FCF)

Cash generated by operations minus capital expenditures.

What Is Free Cash Flow (FCF)?

Free cash flow is the cash a company generates after investing in its business. It's what's actually available to pay dividends, buy back shares, reduce debt, or make acquisitions. Many investors consider FCF more important than reported earnings because it's harder to manipulate.

Formula

FCF = Operating Cash Flow - Capital Expenditures

Why It Matters

Positive and growing FCF is the lifeblood of shareholder returns. A company can report profits on paper but be cash-negative. FCF is the real check on whether the business model actually works.

Related Terms

Profit Margin (Net Margin)EBITDA

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