Free Cash Flow For The Firm - FCFF
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Definition of 'Free Cash Flow For The Firm - FCFF'
A measure of financial performance that expresses the net amount of cash that is generated for the firm, consisting of expenses, taxes and changes in net working capital and investments.
Calculated as:
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Investopedia explains 'Free Cash Flow For The Firm - FCFF'
This is a measurement of a company's profitability after all expenses and reinvestments. It's one of the many benchmarks used to compare and analyze financial health.
A positive value would indicate that the firm has cash left after expenses. A negative value, on the other hand, would indicate that the firm has not generated enough revenue to cover its costs and investment activities. In that instance, an investor should dig deeper to assess why this is happening - it could be a sign that the company may have some deeper problems.
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Video Definition
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Learn how and why investors are using cash flow-based analysis to make judgments about company performance.
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Learn to estimate the amount of cash that flows through a company over a specific period of time.
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Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery.
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This measure has its benefits, but it can also present earnings through rose-colored glasses.
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Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
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Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
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