Free Cash Flow

This is cash flow from operations minus capital expenditures minus cash dividends paid -- at least in the view of some analysts. The truth is that opinions differ about what constitutes ""free"" cash flow and how -- or whether -- it differs from conventional cash flow. The premise behind backing out capital expenditures and dividends is that these are optional and therefore should be set aside to see how much income a company is really generating. The dividend could always be suspended, after all, and even capital intensive firms can usually limp along for awhile on reduced capital outlays. The goal is the same as with cash flow: to look behind the smoke and mirrors sometimes associated with net income.

 

 

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