Free Cash Flow (FCF) to Firm Measure
A Free Cash Flow (FCF) to Firm Measure is a cash flow measure for what is available for distribution among all the securities holders of the economic organization.
- Context:
- It can (typically) be calculated as Operating Cash Flow minus Capital Expenditures (money spent on property, plant, equipment, and any other investments in its business).
- It can be associated with a FCF Growth Rate.
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- Example(s):
- Counter-Example(s):
- See: Earnings Before Interest And Taxes, Depreciation, Amortization (Business), Net Income.
References
2023
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- Free cash flow (FCF) is a financial metric that measures the amount of cash that a company generates after accounting for its capital expenditures (money spent on property, plant, and equipment) and any other investments in its business.
Free cash flow rate is the rate at which a company generates free cash flow over a period of time. It is typically calculated by dividing a company's free cash flow for a given period by its revenue for the same period, and expressing the result as a percentage.
A high free cash flow rate is generally seen as a positive indicator of a company's financial health, as it indicates that the company is generating sufficient cash to fund its operations and invest in future growth. Conversely, a low free cash flow rate may suggest that a company is struggling to generate sufficient cash to support its business activities.
- Free cash flow (FCF) is a financial metric that measures the amount of cash that a company generates after accounting for its capital expenditures (money spent on property, plant, and equipment) and any other investments in its business.
2023
- (Wikipedia, 2023) ⇒ https://en.wikipedia.org/wiki/Free_cash_flow Retrieved:2023-2-21.
- In corporate finance, free cash flow (FCF) or free cash flow to firm (FCFF) is the amount by which a business's operating cash flow exceeds its working capital needs and expenditures on fixed assets (known as capital expenditures). It is that portion of cash flow that can be extracted from a company and distributed to creditors and securities holders without causing issues in its operations. As such, it is an indicator of a company's financial flexibility and is of interest to holders of the company's equity, debt, preferred stock and convertible securities, as well as potential lenders and investors.
Free cash flow can be calculated in various ways, depending on audience and available data. A common measure is to take the earnings before interest and taxes, add depreciation and amortization, and then subtract taxes, changes in working capital and capital expenditure. Depending on the audience, a number of refinements and adjustments may also be made to try to eliminate distortions.
Free cash flow may be different from net income, as free cash flow takes into account the purchase of capital goods and changes in working capital.
- In corporate finance, free cash flow (FCF) or free cash flow to firm (FCFF) is the amount by which a business's operating cash flow exceeds its working capital needs and expenditures on fixed assets (known as capital expenditures). It is that portion of cash flow that can be extracted from a company and distributed to creditors and securities holders without causing issues in its operations. As such, it is an indicator of a company's financial flexibility and is of interest to holders of the company's equity, debt, preferred stock and convertible securities, as well as potential lenders and investors.
2016
- (Wikipedia, 2016) ⇒ https://en.wikipedia.org/wiki/free_cash_flow Retrieved:2016-10-7.
- In corporate finance, free cash flow (FCF) or free cash flow to firm (FCFF) is a way of looking at a business's cash flow to see what is available for distribution among all the securities holders of a corporate entity. ...
2015
- http://www.investopedia.com/terms/f/freecashflow.asp
- QUOTE: Free cash flow (FCF) is a measure of a company's financial performance, calculated as operating cash flow minus capital expenditures. FCF represents the cash that a company is able to generate after spending the money required to maintain or expand its asset base. FCF is important because it allows a company to pursue opportunities that enhance shareholder value.
FCF is an assessment of the amount of cash a company generates after accounting for all capital expenditures, such as buildings or property, plant and equipment. The excess cash is used to expand production, develop new products, make acquisitions, pay dividends and reduce debt. Specifically, FCF is calculated as:
EBIT (1-tax rate) + (depreciation) + (amortization) - (change in net working capital) - (capital expenditure).
- QUOTE: Free cash flow (FCF) is a measure of a company's financial performance, calculated as operating cash flow minus capital expenditures. FCF represents the cash that a company is able to generate after spending the money required to maintain or expand its asset base. FCF is important because it allows a company to pursue opportunities that enhance shareholder value.