Free Cash Flow
Free cash flow (FCF) in accounting and earnings reports represents the cash a company retains after covering operating expenses—like salaries and utilities—and capital expenditures. It’s calculated as FCF = Operating Cash Flow − Capital Expenditures. This metric is vital for investors, directly reflecting a company’s financial strength and flexibility. High FCF indicates the ability to pay dividends, fund expansion, or repurchase shares, while low FCF may signal constraints. By showing disposable cash after essential costs, FCF offers insight into a company’s capacity to generate value and pursue growth opportunities effectively.
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