Plain-English definitions, reviewed by an independent investor
Free Cash Flow
Free cash flow is the cash a business generates after spending to maintain and grow itself.
Free cash flow is the cash a business generates after spending to maintain and grow itself.
FCF = Operating Cash Flow − Capital Expenditures
Why it matters
It is the money a company could truly return, reinvest, or use to survive a downturn.
Common confusion
Accounting profit can look healthy while cash flow is negative; watch both.
Frequently Asked Questions
Is FCF better than profit?
Many prefer it because cash is harder to fake than earnings.
Negative FCF is bad?
Not always for young firms investing heavily, but it must be funded somehow.