Calculating free cash flow (FCF) involves a straightforward formula that measures a company’s financial health and ability to generate cash. Start with the operating cash flow (OCF), typically found in the cash flow statement, and subtract capital expenditures (CapEx) incurred during the same period:
FCF=OCF−CapEx
This calculation reveals the cash available to the company after maintaining and expanding its asset base, crucial for evaluating financial performance and making strategic investment decisions.
