Free Cash Flow (FCF)

FCF = Cash Flow from Operations − Capital Expenditures. It is the cash the business generates after maintaining its existing asset base — available for dividends, buybacks, debt repayment, or acquisitions.

Many analysts prefer FCF to net income because earnings can be distorted by non-cash items (depreciation policies, deferred-revenue recognition, goodwill write-downs). Cash flowing in and out of the bank is much harder to manipulate.

FCF Yield = FCF / Market Cap is a useful valuation tool. A sustained 5%+ FCF yield typically signals a mature, cash-rich business trading at a reasonable multiple.