Why free cash flow is king

Most of our readers would understand the importance of cash flows from operations. They indicate that a company is able to generate cash from its sales. If a company's profits are not backed by sound cash flows from operations, that is a potential red flag. Another useful concept is that of free cash flows (FCF). This is the cash remaining after satisfying the company's operational needs and capital expenditure. A company that generates high free cash flow has a superior standing. Free cash flow has two variants: free cash flow to the firm (FCFF) and free cash flow to equity (FCFE). While F

This article was originally published on March 29, 2022.