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Free Cash Flow (FCF)

 

Free Cash Flow (FCF) is simply cash from operations, minus capital expenditures. It is considered to be a better measure of cash flow than EBITDA because EBITDA leaves out receivables, inventory, and capital expenditures (property, plant, and equipment.) 
 
“Free cash flow is certainly not a cure-all, since it omits the cost of debt. Also, keep in mind that many terrific companies are cash-flow negative in their formative stages. Wal-Mart (NYSE: WMT) reported negative free cash flow for years, while handily beating its cost of capital and building its retail empire. Focusing on FCF alone could lead investors to miss opportunities.”

From Fool.com

 
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