The three ways to calculate free cash flow are by using operating cash flow, using sales revenue, and using net operating profits. Regardless of the method used, the final number should be the same given the information that a company provides. There are three different methods to calculate free cash flow because all companies don’t have the same financial statements. Free cash flow is cash that is generated by a company's operations after certain cash costssuch as reinvestment in its operations through buildings and/or equipmenthave been deducted. Management and investors can use free cash. Free cash flow is just one metric used to gauge a company’s financial health others include return on investment (ROI), debt-to-equity (D/E) ratio, and earnings per share (EPS). Free cash flow refers to a companys available cash repaid to creditors and as dividends and interest to investors.If a company has a decreasing free cash flow, that is not necessarily bad if the company is investing in its growth.Companies can have impressive earnings but poor free cash flow.
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