"Cash flow" and "free cash flow" are financial metrics to determine a company's liquidity. However, there are dis🌜tinct differences between the two that allow investors to see how a company generates cash and how it spends it.

Cash Flow

澳洲幸运5官方开奖结果体彩网:Cash flow is the net amount of 澳洲幸运5官方开奖结果体彩网:cash and cash equivalents transferred into and out of a company. Positive cash flow indicates that a company's 澳洲幸运5官方开奖结果体彩网:liquid assets are increasing, enabling it to settle debts, reinvest in its business, return money to shareholders, and pay expenses. 

Cash flow is reported on the 澳洲幸运5官方开奖结果体彩网:cash flow statement, which 🔥contains three sections detailing operating, investing, and financing activities.

Free Cash Flow

澳洲幸运5官方开奖结果体彩网:Free cash flow (FCF) is the cash a company produces through its operations after subtracting any outlays for investment in 澳洲幸运5官方开奖结果体彩网:fixed assets like 澳洲幸运5官方开奖结果体彩网:property, plant, and equipment. In other words, free cash flow or FCF is the cash left over after a company has paid its operating expenses and 澳洲幸运5官方开奖结果体彩网:capital expenditures.

Free cash flow is a 澳洲幸运5官方开奖结果体彩网:company's ability to generate cash above its operating and investing needs. Free cash flow reveals whether a company has enough, after funding operations and capital expenditures, to pay its creditors and equity investors through debt repayments, 澳洲幸运5官方开奖结果体彩网:dividends, and 澳洲幸运5官方开奖结果体彩网:share buybacks. 

Comparing Cash Flow to Free Cash Flow

Below is an example of the quarterly cash flow statement for Exxon Mobil Corporation (XOM) for the first quarter of 2018. Total cash flow was less than free cash flow partly because of reductions in the 澳洲幸运5官方开奖结果体彩网:short-term debt of $3.872 billion, listed under the financing activities section. Cash outlays for dividends totaling $5.742 billion also reduced the total cash flow for the company. 

Cash Flow

• Exxon had $4.125 billion in cash flow for the quarter (in green at the bottom of the statement).
• The total cash flow includes the net amount of debits and credits for cash activities in all three sections of the statement (operating, investing, and financing).

Free Cash Flow

• Exxon had $8.519 billion in 澳洲幸运5官方开奖结果体彩网:operating cash flow (in blue).
• The company also invested in a new plant and equipment, purchasing $3.349 billion in assets (in red). The purchase is a cash outlay.
• The free cash flow for Exxon was $5.17 billion for the period ($8.519 billion minus $3.349 billion).

The Bottom Line

"Cash flow" and "free cash flow" help reveal a company's liquidity. Liquidity is the ease with which a company can meet its financial obligations. Investors can use these metrics to see how much a company generates, what they're investing in, and how much debt they hold.