Free Cash Flow explained

What is Free Cash Flow (FCF) and how do I calculate it? What is Free Cash Flow used for? What is the mearning of Free Cash Flow? What is the Free Cash Flow performance of Exxon Mobil, Facebook, General Electric and General Motors ? This Finance Storyteller video provides an in depth look at common and alternative definitions of Free Cash Flow (FCF), compares the profit view and the cash flow view of looking at a company’s performance, and analyzes the Free Cash Flow numbers published by Exxon Mobil, Facebook, General Electric and General Motors.

⏱️TIMESTAMPS⏱️
00:00 Introduction to Free Cash Flow
00:56 Free Cash Flow in the financial statements
01:25 Free Cash Flow definition
02:05 Free Cash Flow calculation
03:54 Free Cash Flow example
05:06 Profit vs Free Cash Flow
07:04 Free Cash Flow comparison between companies
10:25 Free Cash Flow and valuation
11:46 Free Cash Flow summary

Free Cash Flow is usually defined as:
Cash flow not required for operations or reinvestment
Cash flow available for distribution among all the securities holders (debt or equity) of an organization
Calculation: Cash From Operating Activities (CFOA) minus Capital Expenditures

Unfortunately, the Free Cash Flow definitions that companies use are not always the same. Some stay very close to what you see here, but we will also see some alternative definitions along the way in this video.

Related videos:
Free Cash Flow case study: Netflix

Cash Flow Statement explained

GAAP versus non-GAAP

From revenue to profit to free cash flow in a business plan

Cash From Investing Activities

Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!

[Oaloni]

Really just one of the best finance YouTube channels out there. Crystal clear explanations and real-world examples.

[vijaysahani]

I am fortunate to have discovered finance story teller videos . Thank you for explaining with clarity.

[binasrinivasan]

Just started studying for My CFA and this video helped me with understanding conceptually what FCF is.
Thanks...Great Video

[cbaide]

Superb video in all apsects: pleasant voice, clear explanations supported with examples from the real world.

[marieearthangel]

Thank you that helped a lot, especially when you showed the tables and the metaphors and examples are great! Thanks.

[x-x-]

Hello, thank you so much for the video. Your videos are my first-choice when i dont get an accounting term. You explain it so well. Keep helping everyone! :D

[CliffBarber]

Great video. Very clearly explained in a reasonable amount of time. Much appreciated!!

[TheWorshipguitar]

Really love your video! You explain key concept very clear with real life example! It's really great!

[nasm]

Thank you for doing this, you're helping people more than you know. Godbless you more.

[chemsss]

One of the best explanations i have heard

[shailendrawalia]

very informative explained in the easiest of keep it up

[MrSvante]

Excellent video, short but to the point!

[philvantol]

Thanks for the video. Actually we discussed the same topic today during a training for non finance employees. I will forward the link to them for reference.

[justice]

Love your videos man thanks. By the way any stock market investor should compare balance sheet and cash flow statement, in order for them to know the effectiveness of management.

[canabislove]

Muito Obrigado. Aula bastante clara e objectiva!

[nicolassuarezblog]

First of all, thanks for the great video, both this one and the rest of the channel, great work, I wanted to comment a doubt if you can attend it, about the calculation of FCF of Facebook, I see that only use the investment capex, but not the maintenance capex, should not you contemplate it in the calculation of the FCF? When I say maintenance capex, I mean the necessary expense to keep the business running (maintenance of equipment and applications, guarantees, licenses, etc.) thanks in advance, regards

[jamesperry]

*This is good teaching. Nice graphics.* _TᕼᗩᑎK YOᑌ._
*Update▶A question. If CFOA = 0 and CAPEX = 1 million$. How much is FCF ?*

[properoldschool]

I found this video very informative. I have been having problems grasping finance during my degree (remote learning) can you offer me any tutoring?

[donfrancis]

Great explanation. I have got a stupid doubt though.
When a company decides to pay dividends, does the FCF decrease?

[holdened]

Great stuff man! Explained very clearly. Good for investing principles. May I ask what can I get from the members area?