### Free Cash Flow Formula & Example

Definition: Free cash flow (FCF) is the cash that a company is able to generate after it pays for capital expenditures such as buildings or equipment.

Formula:
FCF = Operating Cash Flow - Capital Expenditures
Note: Operating Cash Flow is also known as "Net Cash Flow From Operations".

Learn how to calculate free cash flow with the following examples:

Example 1:
CC Company reported \$3 million of cash from operations in its cash flow statement and \$1 million of capital expenditures for the year, then the company's free cash flow was: \$3 million - \$1 million = \$2 million.

Example 2:
James Ltd has the following data:
Net Cash Flows from operating activities \$252,000
Net Cash Flows from investing activities (\$100,000)
Net Cash Flows from financing activities (\$65,000)
Investment in Plant and Equipment \$52,000

Then,
Free cash flow = Net Cash Flows from operating activities - Investment in Plant and Equipment = 252,000 - 52,000 = \$200,000

* Next: Operating Cash Flow to Sales Ratio