Free Cash Flow (FCF)
Cash from operations minus capital expenditures — the cash a business actually generates for owners.
Definition
Free Cash Flow is the cash a company produces after paying for the capex needed to maintain or grow the business. Unlike accounting earnings, FCF is hard to fake — it must reconcile to actual movements of cash. Positive and growing FCF is the foundation of a sustainable business: it funds dividends, buybacks, debt reduction, M&A and reinvestment. Many investors prefer FCF-based metrics over earnings-based ones precisely because of this hardness.
Formula
FCF = Cash from Operations - CapEx
Variants:
Unlevered FCF (to firm) = EBIT*(1-t) + D&A - CapEx - dWorking Capital
Levered FCF (to equity) = Net Income + D&A - CapEx - dWC - Net Debt RepaymentWorked example
Apple reports $122B cash from operations and $11B capex: FCF = $111B. Divided by ~15.5B shares, FCF per share ≈ $7.16. At a stock price of $190 that's a 3.77% FCF yield.
How ARIA Analyst uses it
ARIA pulls 10 years of historical FCF, normalises capex, and uses the trend slope as a feature in both the Valuation Agent and the ML ensemble.
Related terms
FCF Yield
Free cash flow per share divided by share price — the "earnings yield" of cash.
Owners' Earnings (Buffett)
Warren Buffett’s preferred cash-flow measure: net income plus non-cash charges minus maintenance capex.
EBITDA
Earnings before interest, taxes, depreciation and amortisation — operating cash earnings proxy.
Discounted Cash Flow (DCF)
Intrinsic value of an asset as the present value of its future cash flows.
See Free Cash Flow (FCF) in action on any asset
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