Free Cash Flow
Cash from operations minus capital expenditures.
Free cash flow (FCF) represents the cash a business generates after accounting for capital expenditures needed to maintain or expand its asset base. It's the cash truly available for distribution to owners, debt repayment, or reinvestment. FCF is considered one of the most reliable indicators of financial health because it's harder to manipulate than net income.
Formula
Free Cash Flow = Operating Cash Flow − Capital ExpendituresExample
A business generates $120,000 in operating cash flow and spends $35,000 on equipment, resulting in $85,000 in free cash flow available for debt repayment or owner distributions.
Why It Matters for Your Business
Free cash flow shows how much money is truly available after keeping the business running—it's the real measure of what you can afford to reinvest or take home.
Related Terms
More Cash-flow Terms
Burn Rate
The rate at which a company spends cash monthly.
Cash Flow
The movement of money in and out of a business.
Cash Flow Forecast
A projection of expected cash inflows and outflows.
Cash Flow Statement
A financial statement showing cash movements from operations, investing, and financing.
Operating Cash Flow
Cash generated from core business operations.
Related Financial Guides & Resources
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