Free Cash Flow (FCF)

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http://www.investopedia.com/terms/f/freecashflow.asp (1 of 3)3/18/2008 12:10:03 PM

Free Cash Flow (FCF)

1. Stock Picking
2. FOREX Free Cash Flow (FCF)
3. Options Trading
4. IRAs A measure of financial performance calculated as operating cash flow minus capital expenditures. Free
5. Income Tax cash flow (FCF) represents the cash that a company is able to generate after laying out the money
required to maintain or expand its asset base. Free cash flow is important because it allows a company
to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products,
make acquisitions, pay dividends and reduce debt. FCF is calculated as:
Acronyms
Bonds
Buzzwords
FOREX
Mutual Funds
Options & Futures
Retirement
Stocks
It can also be calculated by taking operating cash flow and subtracting capital expenditures.
Taxes
Tech Analysis
Some believe that Wall Street focuses myopically on earnings while ignoring the "real" cash that a firm
Trading generates. Earnings can often be clouded by accounting gimmicks, but it's tougher to fake cash flow. For
this reason, some investors believe that FCF gives a much clearer view of the ability to generate cash
(and thus profits).

It is important to note that negative free cash flow is not bad in itself. If free cash flow is negative, it could
be a sign that a company is making large investments. If these investments earn a high return, the
strategy has the potential to pay off in the long run.

Capital Expenditure
Free Cash Flow For The Firm
Free Cash Flow Per Share
Free Cash Flow Yield
Operating Cash Flow - OCF
Price to Free Cash Flow

Free Cash Flow: Free, But Not Always Easy - Free cash flow is a
great gauge of corporate health, but it's not immune to accounting
trickery.

Taking Stock Of Discounted Cash Flow - Learn how and why

investors are using cash flow-based analysis to make judgments
about company performance.

Where Top Down Meets Bottoms Up - Find the investing "sweet spot" by combining these two styles.

http://www.investopedia.com/terms/f/freecashflow.asp (2 of 3)3/18/2008 12:10:03 PM

Free Cash Flow (FCF)

Top 3 DCF Analysis Pitfalls - This method can be difficult to apply to real-life valuations.

Investment Valuation Ratios: Price/Book Value Ratio - This ratio indicates, how much shareholders are paying for the
company''s net assets. See this section for an indepth look at this ratio and its calculation.

Analyze Cash Flow The Easy Way - Find out how a company spends its money and whether there will be any left over for
investors.

Using DCF In Biotech Valuation - Valuing firms in this sector can seem like a black art, but there is a systematic way to pin a
price on potential.

Debt Ratios: Cash Flow To Debt Ratio - Cash Flow to Debt Ratio measures the company''s ability to cover debt form its
yearly cash flows. See this section for a detailed explanation and calculations.

Cash Flow Indicator Ratios: Introduction - An introduction to Cash Flow Indicator ratios.

DCF Analysis: The Forecast Period & Forecasting Revenue Growth - Determine how far out into the future you should
project cash flow.

The Essentials Of Cash Flow - Tune out the accounting noise and see whether a company is generating the stuff it needs to
sustain itself.

Warning Signs Of A Company In Trouble - Don't let your clients go down with ship! Learn how to escape the water with
these tips.

Spotting Cash Cows - We show you why some of these companies stand apart from the herd.

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