free cash flow

Definition

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.

​ Was this Helpful? YES  NO 3 people found this helpful.

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

​ Was this Helpful? YES  NO 8 people found this helpful.

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

​ Was this Helpful? YES  NO 5 people found this helpful.

Show more usage examples...

Browse by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
owner earnings run rate free cash flow per share