Free cash flow is the amount of cash that a company generates within a given reporting period and that does not have to be reinvested in business operations or in capex. Free cash flow is thus the cash available following the deduction of expenses. Free cash flow is calculated by subtracting cash flow from investment activities from cash flow from operations.
When observed over a longer period free cash flow serves as an indicator of the financial equilibrium of a company. Shareholders and investors can use free cash flow to determine the amount available for the payment of dividends, for share buybacks or to pay off debt.
During the first half of 2007 Deutsche Post World Net generated a positive free cash flow in the amount of 359 million euros (previous year: -182 million euros).
- A&B Financial Dynamics