Metric
Free Cash Flow Margin
Cash left over after running and reinvesting in the business.
Formula
(Operating Cash Flow − Capital Expenditures) ÷ Revenue
Definition
FCF margin shows how much actual cash each dollar of sales generates after the company reinvests in its assets. It's often a cleaner measure of economic profit than net income.
Why it matters
Free cash is what pays dividends, buys back shares, and funds growth. Sustained high FCF margins are a hallmark of high-quality businesses.
Building blocks
- Operating Cash Flow
- Cash generated from day-to-day operations.
- Capital Expenditures (CapEx)
- Money spent on long-term assets like equipment or property.
- Revenue
- Total money earned from selling products or services.
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