Free Cash Flow
Free Cash Flow tells an investor how much cash a company’s operations generate after paying for its investment in physical and intangible assets.
How it is calculated
Operating Cash Flow + Property, Plant, Equipment Change (Net) + Intangible Assets Change (Net)
- Unit
- Currency amount
- Periods
- TTM, Quarterly, Annual
- Source
- Calculated by stockrow from the inputs below
- Made from
- Operating Cash Flow, Property, Plant, Equipment Change (Net), Intangible Assets Change (Net)
- Used in
- Free Cash Flow Growth
Reading Free Cash Flow
How to read it
Free Cash Flow is Operating Cash Flow plus the net change in property, plant and equipment and the net change in intangible assets, as reported in the cash flow statement. Those two changes are usually outflows — money spent on buildings, machinery, software and similar assets — so adding them normally reduces the total. The figure rises when the business brings in more cash from its operations or spends less on investment, and falls when operating cash weakens or investment picks up. stockrow shows it for each quarter, each year and the trailing twelve months.
What is typical
Asset-light businesses such as software and services often turn a large part of their operating cash into free cash flow, while manufacturers, miners, utilities and telecoms reinvest heavily and keep much less. Fast-growing companies may show little or negative free cash flow as they build capacity. Because the figure scales with size, compare it with revenue and with the sector medians.
Pitfalls
Because the asset changes are net, proceeds from selling assets offset spending, which can lift the figure in a year when the company sold property or a division. Working-capital swings, such as collecting receivables early, move operating cash flow without reflecting lasting change. Free Cash Flow feeds Free Cash Flow Growth on stockrow, so a one-off year will show up there too.