Free cash flow
Free cash flow (also known by its acronym, FCF; hereinafter, FCF) is the indicator of cash flow actually available for distribution to the:
- Owners, known as free cash flow to equity (FCFE); and/or
- Company itself, 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 Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Free cash flow (FCF). The cash flow actually available for distribution to all investors after the company has made all investments in fixed assets and working capital necessary to sustain ongoing operations.
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 The amount of cash that could be withdrawn without harming a firm's ability to operate and to produce future cash flows.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.
