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Free cash flow (FCF)

The cash left after a company runs its business and pays for equipment.

FundamentalsBeginner

Definition

Free cash flow is operating cash flow minus capital expenditure. It is the cash available to pay down debt, pay dividends, buy back shares or reinvest. It is harder to manipulate than accounting earnings.

Formula

FCF = operating cash flow - capital expenditure

How it is used

Investors compare profits with free cash flow. Profits that never turn into cash year after year are a warning sign.

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