profitability
Tracked on R40
FCF Free Cash Flow
The cash a company generates after accounting for capital expenditures. The real money left over to pay dividends, buy back shares, reduce debt, or reinvest.
Formula
FCF = Operating Cash Flow − Capital Expenditures
How to Interpret
Positive FCF means the company generates more cash than it spends on operations and investments. Negative FCF isn't always bad — high-growth companies often invest heavily — but sustained negative FCF is a red flag.
Why It Matters
FCF is harder to manipulate than net income or EBITDA. It represents actual cash, not accounting profit. Warren Buffett famously focuses on "owner earnings," which is essentially FCF. A company can report profits while burning cash — FCF reveals the truth.
Example
Apple generated ~$111B in operating cash flow in FY2024, spent ~$10B on capex, yielding ~$101B in FCF.