Most people want to be an investor
But most investors don’t understand what free cash flow is
Here’s a simple breakdown of free cash flow:
But most investors don’t understand what free cash flow is
Here’s a simple breakdown of free cash flow:
1/ Free Cash Flow (FCF) is a metric that shows how much cash a company generates for capital expenditures
It’s a key indicator of a company’s financial health and ability to pay dividends, make acquisitions, and invest in growth opportunities.
It’s a key indicator of a company’s financial health and ability to pay dividends, make acquisitions, and invest in growth opportunities.
2/ FCF is calculated by taking a company’s operating cash flow and subtracting capital expenditures.
This gives us an idea of how much cash a company has available to use for other purposes.
This gives us an idea of how much cash a company has available to use for other purposes.
3/ FCF is important because it shows whether a company is generating enough cash to sustain its operations and grow.
A company with positive FCF is in a better position to pay dividends, acquire companies, and grow their company.
This will be great for the stock.
A company with positive FCF is in a better position to pay dividends, acquire companies, and grow their company.
This will be great for the stock.
4/ On the other hand, a company with negative FCF may struggle to meet its financial obligations and maybe be at risk of defaulting on its debt.
This would impact the stock price in a very negative way.
This would impact the stock price in a very negative way.
5/ Investors should pay close attention to the free cash flow statement when valuing a company.
A company with a strong FCF is usually considered a more stable investment with the chance for massive upside.
A company with a strong FCF is usually considered a more stable investment with the chance for massive upside.
6/ In conclusion, Free Cash Flow is an important metric for investors and analysts to evaluate a company's financial health and its ability to generate cash for other purposes.
Focus on where the money goes!
Focus on where the money goes!
Thank you for reading!
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