BUSINESS SPEAK · FCF
FCF: Free cash flow
The cash left after running the business and reinvesting in it.
What it means
FCF is cash from operations minus spending on equipment and property (capex). It is the money that could be paid to owners, used to repay debt or saved.
Where you’ll meet it
- A business can show a profit and still have little free cash if money is tied up in stock or unpaid invoices.
- Buyers and DCF valuations rely on free cash flow because it is cash, not an accounting figure.
Worked example
Scenario: Net profit 50,000; depreciation 10,000; extra money tied up in stock 8,000; new equipment 12,000.
- Cash from operations: 50,000 + 10,000 − 8,000 = 52,000
- FCF: 52,000 − 12,000 = 40,000
Answer: Free cash flow is 40,000.