📝 What is Free Cash Flow?

💸 What is Free Cash Flow? Imagine Chintu runs a fruit juice stall 🍊🍍. Every month: ✔️ He earns ₹50,000 from selling juices. ✔️ He spends ₹20,000 on fruits, sugar, cups, gas, wages (daily running costs). ✔️ He also spends ₹10,000 to buy a new juicer machine 🧃 (big one-time cost). So after all spending — how much cash is truly “free” in his pocket to use as he likes — maybe to save, party, or open a second stall? 🎉 This leftover money is called Free Cash Flow (FCF)! 💰 🎯 What is Free Cash Flow (FCF)? 👉 Free Cash Flow = Cash from Operations – Capital Expenditures (Capex) ✔️ Cash from Operations = Real cash left after paying for raw materials, staff, rent etc. ✔️ Capex = Big spending on things like machines, buildings, tools — NOT daily costs! 👉 What remains after these is called “Free” because Chintu can use this money freely — for dividends, loan repayment, expansion, or keep in his wallet! 😍 🎨 Funny Example: ✔️ Chintu earns ₹50,000 🏪 ✔️ Spends ₹20,000 for daily stall needs 🍋🍬💧 ✔️ Spends ₹10,000 for a new juicer machine 🧃 👉 Free Cash Flow = ₹50,000 – ₹20,000 – ₹10,000 = ₹20,000 😃 Chintu can now use ₹20,000 freely — maybe open a second stall, throw a party, or save for holidays! 🎈🎉✈️ 🤔 Why is Free Cash Flow Important for Investors? ✔️ Shows how much real cash a company has left after all must-do spending! 💰 ✔️ If Free Cash Flow is HIGH: ✅ Company can pay dividends 💵 ✅ Can repay loans easily 🏦 ✅ Can grow business 🚀 ✔️ If Free Cash Flow is LOW or NEGATIVE: ❌ Company may struggle to survive 😱 ❌ Might take more loans or issue shares (bad sign) 😬 🏆 When High FCF is GOOD? ✔️ Profitable and efficient business 💪 ✔️ Less unnecessary spending 🧹 ✔️ Can handle tough times without fear 🔒 ⚠️ When Low FCF is BAD? ❌ Spending too much on machines/buildings ❌ Poor profits from business ❌ Cash shortage risk 🎈 Funny Tip: Free Cash Flow is like your monthly salary minus all your regular expenses (like rent, food, transport) AND one-time big expenses (like buying a fridge or phone). What remains is your "freedom money" — you can spend it as you wish! 💃🎁 ✔️ High Free Cash Flow = Happy life, weekend party 🍕🥳 ✔️ Low Free Cash Flow = Broke by month-end 😰 🔑 In a Nutshell: ✔️ Free Cash Flow = Real cash left after running & maintaining business ✔️ More FCF = Healthy, rich business ✅ ✔️ Less or negative FCF = Weak, cash-starved business ❌ 💡 "A company with high Free Cash Flow smiles in all seasons — because cash is king!" 👑💰