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Updated 1mo ago.
Updated 1mo ago.
Cash generated by operations, after capital expenditures (CapEx) needed to maintain the business. The cash truly available to repay debt, buy back shares, or pay dividends. More reliable than accounting earnings (which depend on depreciation and other entries). Steady FCF growth is a very positive signal.
A company generates $300M operating cash flow and spends $100M on investments (plants, equipment). Its free cash flow is $200M — the cash actually available for dividends, buybacks or debt repayment.
It's the cash left after keeping the business running. High and growing FCF funds sustainable dividends and share buybacks. It's one of value investors' favorite measures.