Profitability

Free Cash Flow

FCF

Real cash left over after running and maintaining the business

Definition

Unlike earnings (which can be manipulated with accounting), FCF is actual cash generated after paying for operations and capital expenditures (equipment, buildings, infrastructure). Companies use FCF to pay dividends, buy back stock, pay down debt, or reinvest in growth.

Operating Cash Flow − Capital Expenditures

Example

If a company generates $10B from operations and spends $2B on factories and equipment, FCF = $8B. That $8B can be returned to shareholders or reinvested.

See it in a Brief