Finance and accounting
Free cash flow
Cash from operations minus capital expenditure.
Facts checked against sources onWhat does Free cash flow mean?
Free cash flow is the cash a business generates from its operations minus what it spends on capex. It is the cash available to pay lenders and owners or to reinvest. Unlike EBITDA, it takes account of capex and changes in working capital.
Where does it come up in case interview prep?
- A light balance sheet, and why profit is not cashLesson in Business basics for non-business learners
- The cash flow statement, and why profit is not cashLesson in Reading a business through its numbers: the three statements, cash and value
- EBITDA versus operating profit versus free cash flowLesson in Reading a business through its numbers: the three statements, cash and value
- Valuation in practice: multiples, a simple DCF, NPV, IRR and paybackLesson in Reading a business through its numbers: the three statements, cash and value
- Reading a real results release: Inditex, FY2025Lesson in Reading a business through its numbers: the three statements, cash and value
- Using this in a case: what to ask, what to calculate, what to sayLesson in Reading a business through its numbers: the three statements, cash and value
- Subscriber and content economicsLesson in Media, streaming, gaming, and advertising
- LBO returns and fund economicsLesson in Private equity and venture capital
Related terms
- Capex (capital expenditure)Spending on long-lived assets such as machines and buildings.
- Working capitalCash tied up in running the business day to day.
- EBITDAEarnings before interest, taxes, depreciation and amortization.
- DCF (discounted cash flow)Valuing a business from the future cash it will generate.
- ProfitThe money left over after costs. Revenue minus cost.
- RevenueMoney earned from sales, before costs.
- CostWhat it takes to make and sell the product in a period.
- Fixed costA cost that stays the same when volume changes, within a normal range.
Learn it in context
See Free cash flow at work in a lesson from Business basics for non-business learners, with checks as you go.
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