Learn / Fundamentals / Cash flow / Free Cash Flow
FCF ≈ Operating Cash Flow − Capex
Free cash flow is the cash left after the business pays to keep running. Earnings are an accounting opinion. Cash in the bank is a fact.
01 Feel it first
Same company. Toggle Normal accounting vs Boost reported earnings — watch the earnings number climb while cash in the bank stays behind.
02 Break the intuition
Rising earnings, falling cash — classic warning. Reveal the gap.
03 Step through it
Walk the ladder from reported earnings to free cash flow. Earnings stay green while capex can drain the bank.
Start with reported earnings: $10. The slides look green.
Step through the ladder. Earnings stay fixed; cash changes with each adjustment.
04 Sort it
Earnings and cash can tell opposite stories. Sort each card into healthy growth spending vs a warning pattern.
Tap a card, then sort by earnings vs cash quality.
Tap a card, then tap a bucket.
05 Two flavors
Operating cash flow is cash from the core business before big equipment spending. Free cash flow is what is left after that spending.
06 Quality check
When cash leads, matches, or lags reported profit.
07 Check yourself
08 Where it breaks
Building new stores or products can crush free cash flow while creating a better business. Separate keeping-the-lights-on spending from growth when you can.
Collecting a big receivable or stocking inventory can swing one quarter’s cash without changing the real trend.
Paying people in stock is often added back in cash-flow statements, but it still dilutes owners. Cash can look healthier than economic reality.
For banks and lenders, classic free cash flow is a poor fit. Prefer industry cash metrics.
Open any ticker for cash-flow context beside earnings — then screen for cash that matches the story.
Boosting earnings on paper does not mean more cash landed in the bank.
Earnings and cash match. That is a healthy sign — but it does not always last.