Ask a Fool: What Is Free Cash Flow?

Worldwide Invest Better Day 9/25/2012

Is today's edition of "Ask a Fool," analyst Andrew Tonner answers the question: What is free cash flow?

He defines free cash flow as the amount of cash that comes in or out of a business for a given period. He is quick to point out that this differs from net income, which is easily manipulated by accounting trickery and non-cash line items. 

You can calculate free cash flow today by flipping to a company's cash flow statement and subtracting capital expenditures from cash from operations. It's a quick and dirty back-of-the-envelope method that will provide a quick check on a company's free cash flow.

Taking a look at Apple's statement of cash flows shows a whopping $41.7 billion in free cash flow over the past 12 months, compared with the $40.1 billion it reported as net income.

Click the big green button to join the thousands of people celebrating Worldwide Invest Better Day on Sept. 25!

The article Ask a Fool: What Is Free Cash Flow? originally appeared on

Andrew Tonner and The Motley Fool own shares of Apple. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story