Free Cash Flow (FCF) is defined as the amount of cash a firm has after the cost of its operations and spending on capital. Free cash flow comes in 2 forms, levered and unlevered:
- Levered Free Cash Flow : Cash Flow From Operations - Capital Expenditures + Interest Income & Expense
- Unlevered Free Cash Flow : Cash Flow From Operations - Capital Expenditures
Free Cash Flow shows the amount of money which a firm is able to generate after taking into account asset expenditures. FCF is essential in order to increase the value of a firm, as without cash a firm is unable to innovate, pay off debt or perform takeovers.
- Capital Expenditure (CapEX)
- Cash Flow Statement (CFS)
- Earnings Before Interest & Tax (EBIT)
- Leveraged Buyout (LBO)