Free Cash Flow To Sales


DEFINITION of 'Free Cash Flow To Sales '

A ratio that illustrates the percentage of free cash flow to the amount of sales. The numerator is found by determining a company's free cash flow, which is available to debt and equity holders. The denominator is the company's annual sales.


Loading the player...

BREAKING DOWN 'Free Cash Flow To Sales '

Free cash flow is a ratio in and of itself and can indicate the "real" amount of cash that a company earns. This is because it is much more difficult to distort free cash flow with accounting gimmicks than it is to manipulate earnings. Therefore, the ratio of free cash flow to sales is a measure of how much of a company's revenue is transformed into cash.

  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
  2. Sale

    1) In general, a transaction between two parties where the buyer ...
  3. Free Cash Flow Yield

    An overall return evaluation ratio of a stock, which standardizes ...
  4. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash ...
  5. Free Cash Flow Per Share

    A measure of a company's financial flexibility that is determined ...
  6. Encumbrance

    A claim against a property by a party that is not the owner. ...
Related Articles
  1. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  2. Markets

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  3. Markets

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  4. Fundamental Analysis

    Taking Stock Of Discounted Cash Flow

    Learn how and why investors are using cash flow-based analysis to make judgments about company performance.
  5. Investing

    Spotting Cash Cows

    We show you why some of these companies stand apart from the herd.
  6. Stock Analysis

    The Biggest Risks of Investing in Netflix Stock

    Examine the current state of Netflix Inc., and learn about three of the major fundamental risks that the company is currently facing.
  7. Stock Analysis

    Investing in Lumber Liquidators? Read This First

    Find out what investors should know before buying Lumber Liquidators shares. Learn about Lumber Liquidators' financial performance and operational outlook.
  8. Stock Analysis

    What Seagate Gains by Acquiring Dot Hill Systems

    Examine the Seagate acquisition of Dot Hill Systems, and learn what Seagate is looking to gain by acquiring Dot Hill's software technology.
  9. Investing

    Procter & Gamble Restructures, Sheds 100 Brands

    All businesses face adversity, and Procter & Gamble is no exception. We take a look at recent developments affecting this global giant.
  10. Stock Analysis

    How To Start Your Own Private Equity Fund

    Here's a how-to guide on starting on starting a private equity firm.
  1. How can companies use the cash flow statement to mislead investors?

    Cash flow is a means for most investors to examine the actual economics of a business they might invest in, especially from ... Read Full Answer >>
  2. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  3. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  4. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>
  5. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  6. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!