FCF represents the cash a firm has generated for its shareholders, after paying its expenses and investing in its growth.
FCF = Total cash flow (Earnings with noncash charges added back in) - capital spending
FCF can be very useful in assessing a company's financial health because it strips away all the accounting assumptions built into earnings.
A company's earnings maybe high and growing, but until you look at FCF, you don't know if the company's really generated money in a given year or not.
If you're an owner, FCF is ultimately what you're interested in. FCFs represent real cash. Earnings do not.
FCF = Total cash flow (Earnings with noncash charges added back in) - capital spending
FCF can be very useful in assessing a company's financial health because it strips away all the accounting assumptions built into earnings.
A company's earnings maybe high and growing, but until you look at FCF, you don't know if the company's really generated money in a given year or not.
If you're an owner, FCF is ultimately what you're interested in. FCFs represent real cash. Earnings do not.
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