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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
The cash a company generates after paying for operations and capital investments. It's the money available for dividends, buybacks, and growth.
Why It Matters
Free Cash Flow (FCF) is what many professional investors consider the truest measure of financial health. A company can manipulate accounting earnings, but cash is hard to fake. Positive, growing FCF means a business is generating real money. Companies with strong FCF can pay dividends, buy back shares, reduce debt, or invest in growth — all things that benefit shareholders.
Key Points
- Calculate it: Operating Cash Flow minus Capital Expenditures
- Consistently positive FCF is a sign of a healthy, well-managed business
- FCF yield (FCF ÷ Market Cap) is a useful metric — above 5% often signals good value
Related Terms
Common Questions
The cash a company generates after paying for operations and capital investments. It's the money available for dividends, buybacks, and growth. Free Cash Flow (FCF) is what many professional investors consider the truest measure of financial health. A company can manipulate accounting earnings, but cash is hard to fake.
Free Cash Flow (FCF) is what many professional investors consider the truest measure of financial health. A company can manipulate accounting earnings, but cash is hard to fake. Positive, growing FCF means a business is generating real money. Companies with strong FCF can pay dividends, buy back shares, reduce debt, or invest in growth — all things that benefit shareholders.
Calculate it: Operating Cash Flow minus Capital Expenditures
Consistently positive FCF is a sign of a healthy, well-managed business
FCF yield (FCF ÷ Market Cap) is a useful metric — above 5% often signals good value