What Is Free Cash Flow and Why Does It Matter?
What is FCF?
FCF is the cash a business produces after paying for operations and capital investment. Formula: Cash from Ops − Capex.
Why is FCF more honest than earnings?
Earnings use accrual accounting and depreciation. Cash either landed in the bank or it didn't.
What's a good FCF margin?
FCF margin = FCF ÷ revenue. Above 15% is excellent. Software often hits 25–35%.
Frequently asked questions
Can FCF be negative?
Yes — common during heavy investment phases. Persistent negative FCF is a warning sign.
What is FCF yield?
FCF ÷ market cap. Above 5% is solid; below 2% is expensive.
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