What is Free Cash Flow?
Cash left after running and reinvesting in the business - what is truly available to owners and lenders.
Free Cash Flow: definition
Free cash flow strips away the accounting noise and the cost of keeping the business running to show what is genuinely left over. Because it nets out capital spending, it is a tougher and often more honest measure of value creation than net income or even EBITDA. Consistent positive FCF signals a business that funds itself; persistent negative FCF means it depends on outside capital.
Free cash flow
FCF = Operating Cash Flow − Capital Expenditures
Some analysts use unlevered FCF (before interest) for valuation and levered FCF (after interest and debt) for equity. The core idea is cash after necessary reinvestment.
How Fintra handles it
Fintra derives free cash flow from the cash flow statement it already produces, subtracting capital expenditures tracked through the fixed-asset process. Because it sits on live data, FCF trends and runway update as bills, invoices, and capex post - so you see cash generation without exporting to a model.
- FCF computed from operating cash flow and tracked capex
- Trends tie to runway and burn on the same dashboard
- Plans project FCF under different growth and spend scenarios
Worked example
Frequently asked questions
What is the difference between free cash flow and EBITDA?
EBITDA adds back depreciation and ignores capital spending and working-capital changes, so it can look strong even when a business consumes cash. Free cash flow subtracts capex and reflects working capital, making it a more complete picture of cash actually generated.
What is a good free cash flow?
Consistently positive and growing FCF is healthy - it means the business funds its own operations and reinvestment. Early-stage companies often run negative FCF while investing for growth; what matters is the trajectory and whether the spend is building durable value.
What is the difference between levered and unlevered free cash flow?
Unlevered FCF is cash flow before interest and debt payments - the cash available to all capital providers, used in enterprise valuation. Levered FCF is after interest and debt service - the cash available to equity holders. The difference is the treatment of financing.
Why can free cash flow be negative when profit is positive?
Heavy capital spending, growth tying up cash in receivables and inventory, or timing of payments can push FCF negative even with accounting profit. FCF exposes these cash demands that the income statement smooths over.
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