Definition
Free Cash Flow
The cash a company has left after running and maintaining the business.
Free cash flow is the cash a company generates from operations after paying for the investments needed to keep the business running and growing, such as equipment and property. It’s the money genuinely available to pay down debt, buy back shares, pay dividends, or reinvest. Because it’s harder to massage than reported earnings, many investors see steady, growing free cash flow as one of the clearest signs of a healthy business.
Related terms
- Return on Invested Capital (ROIC)How much profit a company earns on the money invested in the business.
- Free Cash Flow YieldFree cash flow as a percentage of a company’s market value.
- Discounted Cash Flow (DCF)A way to estimate a company’s value from its future cash, in today’s dollars.
- Dividend YieldA stock’s annual dividend as a percentage of its price.
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