Free Cash Flow definition Click here to go to the original topic          Value Investing Forum Forum Index -> Getting started - for New Investors blast_investor Thu Mar 09, 2006 10:51 pm     Free Cash Flow definition  Free cash flow measures a firm's cash flow remaining after all expenditures required to maintain or expand the business have been paid off--for example, interest payments and investments in "property, plant and equipment" (PP&E). Free cash flow for a US company can be calculated from its public financial filings by referring to the statement of cash flows and subtracting all expenditures on "PP&E" and any other assets used to maintain or expand the business from the firm's cash flow produced by operating activities. Free cash flow is a measure of the cash produced by the firm in a given period on behalf of equity holders. The true measure of the value of a firm's equity is considered to be the present value of all free cash flows. In contrast to accounting measures of value, free cash flows are more transparent in the sense that a firm engages in less "editing" of the input values before publishing them in financial statements; they are more complete in that they factor in cash uses (and sources) typically ignored by accounting measures of income such as expansion (or shrinkage) in accounts receivables; but they require more expertise and judgment to analyze because they directly reveal the "lumpiness" in a firm's flow of capital expenditures, which accounting measures smooth out.          Value Investing Forum Forum Index -> Getting started - for New Investors Page 1 of 1 Search Engine Indexer BlastInvest @2005 p h p B B © 2001, 2002 p h p B B Group