Fundamental Glossary / Cash Flow Metrics
Free Cash Flow (FCF)
Cash left after the spending required to maintain and, in the unlevered or simple version, grow the asset base.
Formula
A common shortcut is operating cash flow - capital expenditure. Owner earnings and free cash flow to equity are stricter cousins.
What it means
Free cash flow is what can be paid out, used to cut debt, or reinvested, without asking shareholders or lenders for more money.
Say whether capex in the formula is total capex or maintenance only. Total capex produces a lower, more conservative number during a build-out.
How to read it
FCF positive and growing, with moderate reinvestment, is the cash signature of a mature compounder. FCF negative during a clearly identified build-out can still be rational.
What to watch
One year of low capex, a securitisation of receivables, or a delay in payables can create free cash flow that will reverse. Average several years.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.