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Free cash flow

As explained in Investing for Programmers

Free cash flow is the cash a company has left after paying operating costs and capital expenditures.

Free cash flow (FCF) is the cash remaining after a company pays operating costs and capital expenditures. It focuses on spendable liquidity rather than the total value of assets. section 2.1.3

Free cash flow = Operating cash flow – Capital expenditures

Calculate FCF with the simplified relationship: operating cash flow minus capital expenditures. section 2.1.3

Why liquidity matters

Eugene’s antique-car business owns valuable vehicles, equipment, inventory, and customer debts, yet lacks cash for salaries and bills. Those assets may support borrowing but cannot directly pay the plumber. section 2.1.3

Positive asset values do not guarantee bill-paying capacity. FCF supports liquidity analysis, while comparisons and ratios are most reliable among companies in the same industry. section 2.6

How Investing for Programmers covers it

How deep it goes
Defines FCF and gives its simplified formula, then connects it to liquidity; it does not develop a detailed calculation workflow.
Examples
Uses an antique-car business whose valuable inventory cannot directly cover imminent operating bills.
What you can do after
Evaluate a company’s liquidity and distinguish cash availability from asset value when considering financial stability.
How it connects
Connects free cash flow with operating cash flow, capital expenditures, liquidity ratios, solvency, balance sheets, and income statements.
Cover of Investing for Programmers
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