free cash flow

Definition

Cash from operations minus capital expenditures—the actual money left over after keeping the business running that can be used for dividends, buybacks, or acquisitions. It's the ultimate 'show me the money' metric that cuts through accounting games.

Example Usage

Despite reporting profits, the company generated negative free cash flow due to massive infrastructure investments.

Origin

Term popularized in the 1980s as analysts sought metrics less susceptible to accounting manipulation

Fun Fact

Warren Buffett famously focuses on free cash flow over earnings, calling it 'owner earnings'—the actual cash an owner could extract from a business.

Source: Cash flow analysis and equity valuation

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P/E Ratio

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Derivative

A financial instrument whose value is derived from something else, like a bet on a bet, which is exactly as stable as it sounds. They played a starring role in the 2008 financial crisis, proving that when you stack enough abstractions on top of each other, reality eventually comes knocking.

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Penny Stock

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backflush costing

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tax

Money the government extracts from your paycheck for the privilege of living in a civilized society with roads, schools, and bureaucrats. Beyond the transaction fees you pay for specific services, it's the general admission ticket to citizenship. Can also mean any burdensome demand, like when your boss taxes your patience with another Monday meeting.

💰 Finance / Accounting

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