Free Cash Flow
Free Cash Flow
Operating cash flow minus total cash capital expenditures over the same period. This simple measure does not deduct every financing obligation or define distributable cash by itself.
When to use: Assess cash remaining after operating activities and total capital expenditures. Evaluate debt service, other obligations and liquidity needs separately before interpreting this as distributable cash.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| FCF | Free Cash Flow | CFO − CapEx | $ |
| CFO | Cash Flow from Operations | Net cash generated by operating activities (from the cash flow statement) | $ |
| CapEx | Capital Expenditures | Cash spent on property, plant, and equipment | $ |
Real-Life Examples
Example 1: Mid-Cap Industrial
Cash from operations $500M, capital expenditures $150M.
Given
Step-by-Step
For the full dollar inputs, Free Cash Flow is $350,000,000.00.
Frequently Asked Questions
This formula uses total cash CapEx. Subtracting only maintenance CapEx gives a higher, differently defined FCF estimate; it is not the more conservative deduction.
Not necessarily. Debt service, liquidity needs, restrictions and other obligations matter. Distributions can also be funded through borrowing or asset sales, so this is not a strict payout ceiling.