Difference between revisions of "Free cash flow"
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[[Free cash flow]] (also known by its acronym, [[FCF]]; hereinafter, ''FCF'') is the indicator of cash flow actually available for distribution to the: | [[Free cash flow]] (also known by its acronym, [[FCF]]; hereinafter, ''FCF'') is the indicator of cash flow actually available for distribution to the: | ||
| − | *Owners | + | *Owners. This type of distribution is known as [[free cash flow to equity]] ([[FCFE]]); and/or |
| − | *Company itself | + | *Company itself. This type of distribution is known as [[free cash flow to firm]] ([[FCFF]]), |
after the company has made all investments in fixed assets and other [[project]]s, as well as set aside the [[working capital]] necessary to sustain [[ongoing operations]]. | after the company has made all investments in fixed assets and other [[project]]s, as well as set aside the [[working capital]] necessary to sustain [[ongoing operations]]. | ||
Revision as of 16:53, 8 November 2019
Free cash flow (also known by its acronym, FCF; hereinafter, FCF) is the indicator of cash flow actually available for distribution to the:
- Owners. This type of distribution is known as free cash flow to equity (FCFE); and/or
- Company itself. This type of distribution is known as free cash flow to firm (FCFF),
after the company has made all investments in fixed assets and other projects, as well as set aside the working capital necessary to sustain ongoing operations.
Definitions
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Free cash flow (FCF). The amount of cash that could be withdrawn without harming a firm's ability to operate and to produce future cash flows.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
