Widely read:
Free cash flow (FCF) is calculated as the difference between operating profits generated by a company for the year and the amount reinvested back into the business through: (a) investments in working capital; and (b) investments in fixed and intangible assets. Every firm typically goes through four stages in its lifecycle: nascent, growth, maturity and decline - see chart 'Free-cash-flow lifecycle of a typical company'. The interplay of key determinants of free cash flow, i.e., operating profits, reinvestments and thus the quantum of free cash flow generation is significantly influenced by the stage of a company's lifecycle as shown in the chart.
This article was originally published on March 18, 2022.
New episodes every Friday 
