free cash flow

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Free Cash Flow

A measure of a company's ability to generate the cash flow necessary to maintain operations. There is more than one way to calculate free cash flow, but perhaps the simplest is to subtract a company's capital expenditures from its cash flow from operations. Some analysts believe that free cash flow is more important than other measures of financial health because it measures how much cash a company has and can make. This differs from other measures, which are sometimes accused of using both legitimate and illegitimate forms of accounting to make a company look healthier than it really is.

free cash flow

The cash flow that remains after taking into account all cash flows including fixed-asset acquisitions, asset sales, and working-capital expenditures. The definition of free cash flow varies depending on the purpose of the analysis for which it is being used.

Free cash flow.

A business's free cash flow statement may differ significantly from its cash flow statement. The cash flow statement generally represents earnings before interest, taxes, depreciation, and amortization (EBITDA).

Cash flow and EBITDA focus specifically on the profitability of the company's actual business operations, independent of outside factors such as debt and taxes. Free cash flow, however, reports the net movement of cash in and out of the company.

To determine free cash flow, equity analysts add up all the company's incoming cash and then subtract cash that the company is obligated to pay out, which includes all expenses, debt service, preferred dividends, and capital expenditures. The result tells you how much cash was left over or how short of cash the company was at the end of the fiscal period.

References in periodicals archive ?
The intent of the APA was solely to clarify the transfer pricing rules to be applied by FCF to financing activities to affiliates.
The FCF will be retained in the FE sector for the coming 2014-15 academic year, but the Welsh Government wrote to universities last month to inform them of their decision to pull funding for HE.
NUS Wales president Beth Button accused the Welsh Government of taking "a page out of the Westminster playbook", likening its scrapping of the FCF - which currently supports around 5,000 students - to the UK coalition's controversial decision to treble tuition fees.
Conversely, significant capital expenditure by transport companies such as JSC Russian Railways and South Africa's Transnet SOC will contribute to negative FCF in the utilities and transport sectors, which will be the main drag on the aggregate figures.
The surplus amount was deposited in the FCF in pursuance of Section of 24 (3A) of the 1997 SECP Act, it added.
The FCF Group is a client friendly commodity futures firm that puts the needs of the client ahead of its own.
Sheldon has been an advocate for youth aging out of foster care, a friend to FCF, and has worked to improve the agency.
Once the FCF was complete, all the paperwork had to be signed off and a turnaround inspection completed before launching.
T4: urea-treated rice straw+fresh cassava foliage in ratio of UTS to FCF at 1:1 dry matter basis (UTS:FCF)
This unwieldy FCF was formed in 2000 and gave the senior officials of the 18 counties a stranglehold on all Board policies.
Successful management of a county academy The FCF have agreed to continue to allow counties to sign two overseas players, but have put a deadline of July 1 for the signing of any replacements.
FCF board members such as John Lewis, chairman and CEO of The Bank of Fayetteville, are quick to say that FCF is in no way trying to compete with other area foundations for money or donors.