Free Cash Flow
What is free cash flow?
In corporate finance, free cash flow (FCF) is cash flow available for distribution among all the securities holders of an organization. Free cash flow is the cash a company produces from its operations less the cost of expanding its asset base. It is essentially the money that the company could return to shareholders if the company was to grow no further. This operating cash flow also is called the unlevered free cash flow (UFCF). The term “free cash flow” is used because this cash is free to be paid back to the suppliers of capital.
The latter should be worth more than the money that is being enabled in them. The former is not as uncommon as it should be because managers usually benefit by elaborating more than is in the best interests of shareholders. The free cash flow is the same as what the profits would be if a company decided to pay out as much as it could in dividends without either scanning its operations or increasing debt.
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