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 Free Cash Flow?
What can FCF be used for?
- Pay Dividends
- Buy Back Shares
- Pay Down Debt
- Make Acquisitions
- Reinvesting into the business
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.