Glossary

Free cash flow (FCF)

Free cash flow is the cash a business generates from operations after the capital spending needed to maintain and grow it.

Free cash flow equals operating cash flow minus capital expenditures. It is the cash actually available to pay down debt, return to shareholders, or reinvest, after the business has paid to keep its assets running.

Unlike net income, FCF is harder to massage with accounting choices, which is why many investors watch it closely. Negative FCF is not automatically bad for a young, fast-growing company, but it does mean the business is consuming cash.

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