Glossary · Updated Oct 23, 2026
Free cash flow
The cash a company generates from operations after the capital it spends on its assets. It is harder to manipulate than reported profit.
Free cash flow is the cash a business has left from its operations after paying for the equipment and property it needs to keep running and growing. It is the money that can go to debt repayment, dividends, buybacks, or acquisitions.
How the platform calculates it
Free cash flow = cash from operations − |capital expenditure|
Capital expenditure appears as a negative number in most cash flow statements, because it is cash going out. The formula takes the absolute value, so capex always reduces free cash flow.
Worked example
Example Co. reports the following for the year (in millions):
Line | As reported | Used in formula |
|---|---|---|
Cash from operations | 1,200 | 1,200 |
Capital expenditure | (400) | 400 |
Free cash flow | 800 |
How to read it
- A company can report a profit and still have negative free cash flow, usually because it is spending heavily on capacity or working capital is absorbing cash.
- Compare free cash flow with net income over several years. A large, persistent gap is worth explaining before you rely on either number.
- For banks, operating cash flow is shaped by lending and deposit activity, so read free cash flow alongside the balance sheet rather than on its own.