In this “What Is…?” series, we demystify investing terms for people who are just starting out in the stock market.

Right now, let’s understand more about the term, “free cash flow”.

Free cash flow is the amount of money generated by a business after accounting for operating and capital expenses.

The free cash flow of a company can be then used to reinvest into its own business, acquire other businesses, pay dividends to its shareholders, buy back its own shares, or pay off its borrowings.

Without any free cash flow, the business has to either borrow money from banks or undertake equity fundraising to sustain its daily operations.

As such, free cash flow is said to be the lifeblood of a company.

Free cash flow can be calculated by looking at the cash flow statement of a company’s financial