Free cash flow (FCF) is the cash flow available for the company to repay creditors or pay dividends and interest to investors. Some investors prefer FCF or FCF ...LinkedInwithBackgroundCorporateFinance&AccountingGuidetoAccountingFinancialAnalysisCorporateFinanceFinancialStatementsFinancialRatiosAccountingDebtMergers&AcquisitionsCorporateInsuranceSeeAllCorporateFinance&AccountingFinancialStatementsWhatisFreeCashFlow(FCF)?Freecashflow(FCF)representsthecash acompanygeneratesafteraccountingforcashoutflowstosupportoperationsandmaintainitscapitalassets.Unlikeearningsornetincome,freecashflowisameasureofprofitabilitythatexcludesthenon-cashexpensesoftheincomestatementandincludesspendingonequipmentandassetsaswellaschangesinworkingcapitalfromthebalancesheet.Interestpaymentsareexcludedfromthegenerallyaccepteddefinitionoffreecashflow.Investmentbankersandanalystswhoneedtoevaluateacompany’sexpectedperformancewithdifferentcapitalstructureswillusevariationsoffreecashflowlike free cashflowforthefirm and free cashflowtoequity,whichareadjustedforinterestpaymentsandborrowings.Similartosalesandearnings,freecashflowisoftenevaluatedonapersharebasistoevaluatetheeffectofdilution.KeyTakeawaysFreecashflow(FCF)representsthecash availableforthecompanytorepaycreditorsorpaydividendsandinteresttoinvestors.FCFreconcilesnetincomebyadjustingfornon-cashexpenses,changesinworkingcapital,andcapitalexpenditures(CAPEX).However,asasupplementaltoolforanalysis,FCFcanrevealproblemsinthefundamentalsbeforetheyariseontheincomestatement.1:12UnderstandingFreeCashFlowUnderstandingFreeCashFlow(FCF)Freecashflow(FCF)isthecashflow availableforthecompanytorepaycreditorsorpaydividendsandinteresttoinvestors.SomeinvestorspreferFCForFCFpershareoverearningsorearningspershareasameasureofprofitabilitybecauseitremovesnon-cashitemsfromtheincomestatement.However,becauseFCFaccountsforinvestmentsinproperty,plant,andequipment,itcanbelumpyandunevenovertime.BenefitsofFreeCashFlow(FCF)BecauseFCFaccountsforchangesinworkingcapital,itcanpro