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Free Cash Flow

What is Free Cash Flow (FCF)?

Free cash flow (FCF) describes the cash left over after your company pays its operating expenses and handles maintenance costs for capital assets. This plays a key role in making a company look financially healthy and desirable to investors.

Depending on the information at your disposal, you can use one of three formulas to calculate FCF:

  1. FCF = operating cash flow - capital expenditure
  2. FCF = net operating profit post-taxes - net operating capital investment
  3. FCF = sales revenue - (operating costs + taxes) - required operating capital investments

Related terms

Annual Recurring Revenue (ARR)
Annual Recurring Revenue (ARR) is a key metric used by subscription-based businesses to track and measure their predictable, recurring revenue streams over a one-year period.
Automated Cash Application
Automated cash application (also known as automated cash posting or automated cash matching) is a process in accounting and financial management that uses technology and algorithms to match incoming payments or cash receipts with corresponding invoices or accounts receivable entries in an organization's financial records.
Average Days Delinquent
Average day(s) delinquent (ADD) is a metric that helps determine the efficiency of a company’s debt collection efforts.
Bill Capture
Bill capture, also known as invoice capture, refers to the process of extracting data from incoming bills, invoices, or purchase documents and converting it into a digital format that can be processed and managed electronically within an organization's accounting or enterprise resource planning (ERP) system.
Budgeting and Planning
Budgeting and planning is the process of setting financial goals, creating a detailed plan to achieve those goals, and allocating resources to various activities and initiatives within an organization.
Business Intelligence
Business intelligence (BI) refers to the use of technology, tools, processes, and methodologies to analyze and transform raw data into actionable insights for making informed business decisions.