Free Cash Flow

 
TOP CONTRIBUTORS

Free Cash Flow (FCF) is a non-GAAP measure of financial performance, similar to earnings. Specifically, it measures the cash flow available for distribution among all the security holders of a company, including equity holders, debt holders, preferred stock holders, convertibles holders, and so on. It can also be thought of as the cash left after the financing of projects required to maintain or expand the asset base. Many investors prefer to track free cash flow as opposed to GAAP earnings because it is much more difficult for companies to fake cash flow. Academic research has shown that the higher the quality of a firm's earnings (i.e., the ratio of cash flow from operations to GAAP net income), the better the returns shareholders realize.

Free cash flow is the basis of discounted cash flow (DCF) analysis, which can be used to determine the total value of a company's operations.

FCF = Net Income + Amortization & Depreciation - Change in Working Capital - Capital Expenditures

See also: Unlevered Free Cash Flow

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki