Wednesday, August 20, 2014

Financial Thought of the Day August 20, 2014: Free Cash Flow

Free Cash Flow is defined by the following formula: FCF = Operating Cash Flow - Capital Expenditures.

This represents a better measure of a company's profitability as it strips away accounting accruals leaving behind actual cash flow generated less the investments back into the business. A particular company may not represent a good investment if it utilizes all of its cash in capital maintenance.

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