What Is Free Cash Flow (FCF)?
Free cash flow (FCF) is the cash a company has left after paying for its operations and the capital investments needed to maintain and grow the business. Many investors trust it more than reported profit.
How it's calculated
FCF = operating cash flow − capital expenditure (capex). Operating cash flow is the cash the business actually generated; capex is what it spent on plant, equipment, and other long-term assets. What remains is genuinely free — available to pay dividends, reduce debt, or reinvest.
Why cash beats profit
Reported net profit includes non-cash items and accounting judgements, so a company can show a profit while bleeding cash. FCF is harder to massage — it reflects real money moving. A business with consistent, growing FCF is usually on solid ground.
What negative FCF means
Negative FCF isn't always bad — a young company investing heavily to grow can burn cash for years and still be healthy. But persistent negative FCF in a mature business is a warning. Read FCF alongside the cash flow statement.