Most people are familiar with the term "cash flow." Cash flow is simply the money that comes in and out of a business. It's the money that a business uses to pay its bills, make its products, and so on. Free cash flow, on the other hand, is a bit more complicated.
Free cash flow is the cash that a business has available after it has paid for all of its expenses. In other words, it's the money that a business has left over after it has taken care of all of its obligations.
There are a few different ways to calculate free cash flow, but the most common method is to take a company's operating cash flow and subtract its capital expenditures. Capital expenditures are the funds that a company uses to buy new equipment, build new facilities, and so on.
The difference between cash flow and free cash flow is important because it can give you a better idea of how much money a company actually has to work with. For example, a company with a lot of debt may have a positive cash flow, but a negative free cash flow. This means that the company is spending more money than it is bringing in, and it may have trouble meeting its financial obligations in the future.
On the other hand, a company with a positive free cash flow is in a much better position. This means that the company has more money than it is spending, and it can use this money to grow its business, pay off its debts, and so on.
Free cash flow is also a important metric to consider when you're trying to value a company. After all, if a company doesn't have any free cash flow, then it's not going to be worth very much.
So, to sum up, the difference between cash flow and free cash flow is that free cash flow is the money that a company has available after it has paid for all of its expenses. It's a important metric to consider when you're trying to value a company, and it can give you a better idea of a company's financial health.