Operating cash flow minus what the company spent on physical and intangible investment — the cash left over for everything else.
Formula
FCF = operating cash flow − capital expenditures
Example
FCF is the cash a business generates after paying for the investment it needs to maintain and grow.
Free cash flow is what funds:
A consistently positive and growing FCF is one of the most-watched indicators of a healthy business.
FCF subtracts capex; EBITDA doesn't. For asset-heavy companies, the two numbers can be very different.
Real cash the core operations generated in a period — net income adjusted back to a cash basis.
Cash spent on long-lived physical or intangible assets — factories, machines, vehicles, software platforms.
Operating income before non-cash charges are taken out — a rough proxy for cash-generating power.
Enterprise value divided by EBITDA — a debt-adjusted multiple commonly used in M&A and across capital structures.