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What Is Free Cash Flow (FCF)?

Free cash flow (FCF) is the cash a company has left to use freely after subtracting cash used in investing activities, such as capital expenditure, from the cash generated by its operating activities.

How it is calculated

Free cash flow is often calculated simply as "cash flow from operating activities − cash flow from investing activities." Both figures are taken from the cash flow statement.

What to keep in mind

Free cash flow is used as a rough gauge of how much cash a company has available to fund dividends, share buybacks, debt repayment, and new investment. Rather than looking at a single year's change, checking the trend over several periods makes it easier to grasp a company's general ability to generate cash.

This article is provided for general informational purposes only and does not recommend or solicit the purchase or sale of any specific investment method or security. Final investment decisions are your own responsibility.

Frequently Asked Questions

Is it a problem if a company's free cash flow is negative?
Not necessarily. Companies in a growth stage may make active capital investments to expand their business, causing spending in investing cash flow to temporarily exceed operating cash flow. It is important to look at the background and the trend over time, not just a single year's figure.
Where can I check a company's free cash flow?
It can be calculated from the 'cash flow from operating activities' and 'cash flow from investing activities' figures in the cash flow statement disclosed in earnings summaries and securities reports.

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