Free cash flow

Why it is harder to flatter than profit

Negative is not automatically bad

A worked example

A company reporting $12bn operating cash flow and $4bn capital expenditure produced $8bn of free cash flow. If it paid $3bn in dividends, the payout consumed under half of the cash generated.

How we use it

Free cash flow feeds our Capital Returns Intelligence research lens, where dividends and buybacks are checked against the cash that actually funded them. That lens is research-only and contributes nothing to the Suggested Investment Score.

Related terms

• Operating cash flow
• Payout ratio
• Capital expenditure

Keep reading

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• Diversification

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