What is Free Cash Flow (FCF)?
Nexa Consultancy | Startup & Finance Glossary
Free Cash Flow (FCF) is the cash a company generates after accounting for the cash outflows to support its operations and maintain its capital assets. It is a measure of a company's financial performance and flexibility, showing how much cash is available to be distributed to investors or reinvested in the business.
For Startups: While most early-stage startups have negative FCF (as they are investing heavily in growth), tracking the path to FCF positivity is a key long-term goal. FCF-positive startups are less reliant on external funding and have more control over their destiny.
For Mature Companies: For public companies, FCF is one of the most important metrics for valuation, as it represents the cash that could be returned to shareholders.
Calculation: FCF = Operating Cash Flow - Capital Expenditures
Example: A company generates ₹50 Lakhs in cash from its operations but spends ₹20 Lakhs on new servers and equipment. Its Free Cash Flow is ₹30 Lakhs.