Definition

Free cash flow (FCF) is the remainder after all the cash outflows and capital assets of a company are accounted for. Simply put, it is the cash left over after paying for capital expenditures (CapEx) and operating expenses (OpEx) of the company.

Example

FCF is calculated as Cash from Operations – CapEx

Why it matters

Free cash flow is used to get insights into the financial performance of any business. Apart from a company's financial health, it also acts as an indicator of expansion potential, what investors think of the business and whether any restructuring is needed.

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