A useful parameter for equity holders, debt holders, stockholders, and convertible security holders to know just how much cash can be extracted from a company without causing issues to its operations, Free Cash Flow is the cash a company produces through its operations, less the cost of expenditures on assets. Similarly, it is the cash leftover after a company pays for its operating expenses and capital expenditures, also known as CAPEX. It is an important gauge to know how efficient a company is at generating cash.
Simple Way to Calculate FCF
Free cash flow is what’s left over after paying expenses, taxes and interest on debt
Free cash flow can be used to: