free cash flow


Operating cash flows (net income plus amortization and depreciation) minus capital expenditures and dividends. Free cash flow is the amount of cash that a company has left over after it has paid all of its expenses, including investments. Negative free cash flow is not necessarily an indication of a bad company, however, since many young companies put a lot of their cash into investments, which diminishes their free cash flow. But if a company is spending so much cash, it should have a good reason for doing so and it should be earning a sufficiently high rate of return on its investments.
While free cash flow doesn't receive as much media coverage as earnings do, it is considered by some experts to be a better indicator of a company's financial health.

Use free cash flow in a sentence

You should always try to keep a free cash flow going so it is easier for you to do your daily business.

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The free cash flow was the bottom line the CEO was referring to in the meeting where he analyzed the final year results.

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There was a free cash flow and I thought that sounded great, but then I thought the opposite once I learned about it further.

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discounted after-tax cash flow owner earnings run rate