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Free cash flow

Operating cash flow less capital expenditure — the money that can actually be handed to shareholders.

Formula

FCF = OCF - CAPEX

Capital expenditure is subtracted from operating cash flow. Many companies build their dividend policy on exactly this figure.

How to read the number

This is the only cash a company can allocate without borrowing or eating into the business itself.

When the metric lies

Free cash flow is easy to inflate by cutting capex: a year without maintenance looks like a year of excellent cash generation, and the bill arrives three years later.

Where it is used

The metric is calculated across every security in the catalogue and appears on the instrument card, in the multiples table and in the screener.

Also known as: free cash flow, fcf

Related terms

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Предыдущий шаг: The cash flow statement: why it is more honest than profit