Free Cash Flow (FCF)
FCF is the cash a company generates after accounting for cash outflows to support operations and maintain capital assets — cash available for distribution to all investors.
Concept map
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Definition
FCF is the cash a company generates after accounting for cash outflows to support operations and maintain capital assets — cash available for distribution to all investors.
Use case
Used in corporate finance workflows, analysis, and technical interviews.
Judgment check
Useful only when the assumptions and inputs behind the metric are understood.
Deep dive
How to think about Free Cash Flow (FCF)
FCF = Operating Cash Flow - Capital Expenditures. Unlevered FCF is before debt payments (used in DCF valuations); Levered FCF is after debt (available to equity). Positive FCF indicates financial flexibility for dividends, buybacks, debt repayment, or acquisitions. Negative FCF is common for growth companies reinvesting heavily.
Example: Company generates $200M operating cash flow, spends $80M on CapEx. FCF = $120M. With $500M market cap, the FCF yield is 24% — potentially attractive if sustainable. Startup tech firms often show negative FCF as they prioritize growth over profitability.