Free Cash Flow (FCF): Why Investors Care
Free cash flow explained: what FCF is, how it's calculated, and why it matters for intrinsic value and stock valuation.
What is free cash flow?
Free cash flow (FCF) is the cash a business generates after paying for operating costs and necessary investments (capex). Many intrinsic value methods rely heavily on cash flows.
Why it matters for intrinsic value
- FCF can be used in DCF valuation models
- Helps assess financial flexibility (buybacks, dividends, debt paydown)
- Can reveal quality better than accounting earnings in some cases
Connect fundamentals to valuation
Learn intrinsic value, then practice on real stocks using price vs value pages.
FAQs
Is free cash flow the same as profit?▼
No. Profit is an accounting measure. Free cash flow focuses on actual cash generated after reinvestment needs.
Can free cash flow be negative?▼
Yes. It can be negative during heavy investment periods, downturns, or for unprofitable companies.
Related
Intrinsic Investor is for education and research only. Not financial advice.