Glossary term
Free Cash Flow
Cash left after a company pays to maintain and grow its business.
Free cash flow is the cash a company generates after operating expenses and capital spending. It matters because accounting earnings can be affected by estimates, while cash flow shows how much money the business can actually use for debt repayment, buybacks, dividends, or reinvestment.
Example: A company with rising profits but falling free cash flow may be using a lot of cash to fund inventory, receivables, or capital expenditure.