Also called FCF
Free cash flow
The cash left for investors after keeping the business running. This is the number a DCF actually values, taken from the most recent fiscal year.
Updated 2026-09-03
How it is calculated
Free cash flow = operating cash flow − capex
Free cash flow is the cash a business has left after paying to keep the lights on and after buying the equipment it needs to stay in business. It is what could be handed to owners without damaging the company. It is the number a DCF actually values.
free cash flow = operating cash flow − capital expenditure
operating cash flow is cash the core business generated. capex is what was spent on property and equipment, reported as a negative figure.
Why cash rather than earnings
Reported profit is an opinion assembled under accounting rules. Depreciation schedules, revenue recognition, provisions and write-downs all move it, and none of them move the bank balance. Cash flow is harder to shape. A company can report a profit for years while consuming cash, and the cash statement is where that shows up.
Apple's fiscal year as Angie read it on 2026-09-05. The projection started from $100.30B rather than the reported $98.77B, because the normalized base fits the trend across several years instead of taking the latest one.
Where it misleads
Capex mixes two different things. Some of it maintains what already exists, which is a genuine cost of staying in business. Some of it builds new capacity, which is an investment in growth and arguably should not be subtracted from cash available to owners. A company spending heavily to grow looks cash-poor on this measure even when the underlying business is strong.
Amazon is the standard illustration. On the same run, its operating cash flow was $139.51B and its capital expenditure was $131.82B, leaving $7.70B of reported free cash flow on a company of that size. Almost all of that spending is building capacity that does not yet earn. Angie partially answers this with an owner-earnings adjustment, adding back capex above depreciation, but the adjustment shrinks as projected growth rises, on the reasoning that growth capex is the very spend funding the growth already being counted.
See also
- Operating cash flow — Cash the core business actually generated, before anything is spent on maintaining or expanding it. Harder to massage than reported earnings.
- Capex — Spending on property and equipment. Reported as a negative number and shown here as the amount subtracted from operating cash flow.
- DCF base — The figure the projection actually starts from: a trend-fitted or median value across several years, so one distorted year cannot become a runaway base. It can sit far from the latest year.
- Discounted cash flow — Valuing a company by projecting the cash it will generate and discounting each year back to today. Everything Angie does is one long DCF.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
