Introduction: What is Free Cash Flow (FCF)?
Free cash flow is a measure of how much cash a company generates after accounting for capital expenditures.
Free cash flow is one way of looking at the financial health of a company. It is calculated by taking the net income and adding back non-cash expenses, such as depreciation and amortization. FCF can be used to compare the financial performance between companies, or it can be used to compare the performance over time for one company.
This metric is important because it tells investors how much money they will have available in the future to pay back debts and make investments. The higher FCF you have, the better off you are.
What are the Benefits of Free Cash Flow?
Free cash flow is a measure of a company’s financial health. It is calculated by subtracting capital expenditures from operating cash flow. Free cash flow is important because it provides an indicator of the company’s ability to pay its debts and to reinvest in the business.
There are three main benefits of free cash flow:
1) It provides an indicator of the company’s ability to pay its debts and to reinvest in the business.
2) It can be used as a basis for valuation and
3) It may be used as an input into decision-making processes such as capital allocation, dividend policy, or share repurchase policies.