What is Free Cash Flow (FCF)?

Free Cash Flow (FCF) is the cash that a company generates after taking into consideration cash outflows that support its operations. It is an important measurement since it shows how efficient a company is at generating cash. It also tells us how much a company has left after paying its operating expenses and maintaining its capital expenditures; in short, how much money it has left after paying the costs to run its business.

How to Calculate FCF?

Free Cash Flow formulae

What can FCF be used for?

  1. Pay Dividends
  2. Buy Back Shares
  3. Pay Down Debt
  4. Make Acquisitions
  5. Reinvesting into the business

Our Stand

Free Cash Flow is an important metric that investors use to assess the financial health of a company. It shows how much cash is left over after operating expenses and capital expenditures are accounted for. As a result, the higher a company’s cash flow, the better it is positioned to pay dividends, buy back shares, pay down debt, make acquisitions, and reinvest in the business to contribute to growth.

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