free cash flow
free cash flow A measure of the cash that a company is generating or consuming. Free cash flow is often defined as after-tax operating profit less net capital expenditure:
However, there is no precise definition of free cash flow: another equation might include changes in working capital. Making comparisons between companies on this basis is not very useful if they are using different definitions. Free cash flow is not determined in accordance with generally accepted accounting principles (GAAP) and should be considered in addition to, not as a substitute for, financial measures determined in accordance with GAAP.
Free cash flow is important for managers as a positive cash flow can be used to pay dividends, acquire other companies, or invest in new opportunities. It is also an important measure of a company’s ability to reduce debt. The value of a company can be calculated as the sum of the future discounted free cash flows (seediscounted cash flow).
- post-date
- post-entry duty
- poster
- post hoc segmentation
- postpurchase behaviour
- potential entrant
- potentially exempt transfer
- potential market
- pound
- power of attorney
- power styles
- power to sue
- p.p.
- PPI
- PRA
- preacquisition profit
- preapproach
- preautomation analysis
- precept
- precious metals
- predatory pricing strategy
- predetermined overhead rate
- pre-employment health questionnaires
- pre-emption
- pre-emption rights