Free Cash Flow - FCF

Free Cash Flow - FCF

A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make acquisitions, pay dividends and reduce debt. FCF is calculated as:

EBIT(1-Tax Rate) + Depreciation & Amortization - Change in Net Working Capital - Capital Expenditure

It can also be calculated by taking operating cash flow and subtracting capital expenditures.

Some believe that Wall Street focuses myopically on earnings while ignoring the "real" cash that a firm generates. Earnings can often be clouded by accounting gimmicks, but it's tougher to fake cash flow. For this reason, some investors believe that FCF gives a much clearer view of the ability to generate cash (and thus profits).

It is important to note that negative free cash flow is not bad in itself. If free cash flow is negative, it could be a sign that a company is making large investments. If these investments earn a high return, the strategy has the potential to pay off in the long run.


Investment dictionary. . 2012.

Игры ⚽ Нужно сделать НИР?

Look at other dictionaries:

  • Free cash flow — In corporate finance, free cash flow (FCF) is a cash flow available for distribution among all the security holders of a company. They include equity holders, debt holders, preferred stock holders, convertibles holders, and so on.There are two… …   Wikipedia

  • Cash cow — In business, a cash cow is a product or a business unit that generates unusually high profit margins: so high that it is responsible for a large amount of a company s operating profit. This profit far exceeds the amount necessary to maintain the… …   Wikipedia

  • FCF — bezeichnet: Fast Cruiser Ferry, ein spezielles Kreuzfahrtschiff FC Frauenfeld, ein Schweizer Fußballverein Federação Caboverdiana de Futebol, der Fußballverband der Republik Kap Verde Federación Colombiana de Fútbol, der Fußballverband von… …   Deutsch Wikipedia

  • FCF — may stand for: *Family Care Foundation *Fast Connection Failover *Federação Caboverdiana de Futebol *Feline Conservation Federation *Fight Club Finland *Free cash flow *Free Congress Foundation *Frontiersman Camping Fellowship *FC Flora *FC… …   Wikipedia

  • FCF — Free Cash Flow свободные средства; свободный поток денежных средств Словарь бизнес терминов. Академик.ру. 2001 …   Словарь бизнес-терминов

  • FCF — Free Cash Flow (Business » Accounting) * Family Care Foundation (Community) * Faith Christian Fellowship (Community » Religion) * Frontiersman Camping Fellowship (Community » Sports) * Fellowship of Christian Firefighters (Community) * First… …   Abbreviations dictionary

  • Net operating assets — (NOA) are a businesses operating assets minus its operating liabilities. NOA is calculated by reformatting the balance sheet so that operating activities are separated from financing activities. This is done so that the operating performance of… …   Wikipedia

  • С — Сальдо (balance) Cальдо внешней торговли [balance of trade] Сальдо государственного бюджета [balance of state bud­get] Сальдо торгового баланса см. Сальдо внешней …   Экономико-математический словарь

  • Свободный денежный поток — (Free Cash Flow FCF) показатель МСФО, разница между поступлениями денег от продажи товаров и услуг и расходованием денег, связанным с обеспечением процесса производства и реализации этих товаров и услуг, выплатой налогов и инвестициями. С.д.п.… …   Экономико-математический словарь

  • свободный денежный поток — Показатель МСФО, разница между поступлениями денег от продажи товаров и услуг и расходованием денег, связанным с обеспечением процесса производства и реализации этих товаров и услуг, выплатой налогов и инвестициями. С.д.п. это средства,… …   Справочник технического переводчика

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”