FREE CASH FLOW Meaning and
Definition
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Free cash flow is a financial metric that measures the amount of cash generated by a business entity after deducting necessary capital expenditures and operating expenses. It represents the surplus cash available to the company for distribution to stakeholders, including shareholders, for reinvestment in the business, or for debt reduction.
In more specific terms, free cash flow is calculated by subtracting capital expenditures from operating cash flow. It indicates how much cash a company has at its disposal for various purposes, such as investments in growth, acquisitions, debt repayment, dividend payments, or simply to strengthen the financial standing of the company.
Free cash flow is an important indicator of a company's financial health and profitability. Positive free cash flow suggests that a company is generating enough cash to fund its operations and growth while still having cash left over. Conversely, negative free cash flow indicates that a company may need to rely on external financing or reduce expenditures to meet its obligations.
Investors and analysts often examine free cash flow as it provides insights into a company's ability to generate return on investment and its potential for future growth. A consistently positive free cash flow is generally viewed as a positive sign, as it allows a company to invest in new opportunities or return cash to shareholders, enhancing shareholder value.
Common Misspellings for FREE CASH FLOW
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- frew cash flow
- fres cash flow
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