Free Cash Flow 0

Hi Friends,

The concept of Free Cash Flow is that it is the cash flow actually available for distribution to the investors, after the company has made all the investments in fixed assets and working capital necessary to sustain ongoing operations.

So, If you use (NOPAT+Depreciation) – Gross Investment in Working Capital, you will find the final balance of cash flow the company created AFTER reinvesting in operations.

There is also an order of what you do with Free Cash Flows.

1) Pay interest to debtholders;

2) Repay debtholders (reducing your short-term debt)