Is Free Cash Flow a Scam? or Is It Legitimate? Find Out Here

So, what is Free Cash Flow? Is Free Cash Flow a scam? OR Is it something worth Your Effort learning about? Well, let me explain things to you.

But before we even dig deeper into what Free Cash Flow is all about, as to whether its a scam or worth your consideration, watch the video below.

 

 

Free Cash Flow is not a scam, but rather Free Cash Flow is a way of measuring or assessing a  company’s expenditure, or how much cash a  business or corporate is able to generate after accounting for the amount of money spent on  maintenance of a company’s assets, such as building and equipment.

So basically, Free Cash Flow, (which abbreviated FCF) is an assessment of the amount of cash a company generates after accounting for all capital expenditures, such as buildings or property, plant and equipment.

The video below explains what Free Cash Flow is and how it works. You can watch it.

 

 

How to Calculate Free Cash Flow (FCF)

To calculate a company’s cash flow, there is a simple formula to use. In many places, you see formulas that look somehow complicated; however, I’m going to make things very easy for you to understand.

So, to find the Free Cash Flow of a Business, the simple formula to use is as shown below;

FCF = Operating Cash Flow – Capital Expenditures.

To make things very clear, this basically means the amount of money a company has left as their profit after deducting their capital expenditure (total amount of money spent) from their Free Cash Flow.

For example, let say a company named Sasso Coil’s cash flow statement reported $20 million of cash from operations and $8 million of capital expenditures for the year, then Company Sasso Coil’s free cash flow will be calculated as shown below;

 $20 million – $8 million = $12 million.

Below is another video that clearly interpret what Free Cash Flow is and how it can be used, especially by investors to determine whether it is a company is worth investing it or not.

 

 

What it means is that FCF  measures a company’s ability to generate cash, which is a fundamental basis for stock pricing.

 

Why It Is Vital to Know a Company’s FCF

Free Cash Flow, as explained above, is vital because, it help businesses or corporate institutions to determine whether they have enough cash to expand, develop, new products, buy back stock, pay dividends, or reduce the company’s debt.

Also, knowing a company or a corporate Free Cash Flow is very important because, this helps investors to determine  the company’s actual Cash Flow and to gain insight into a company’s ability to generate cash.

In this way, investors are able to know whether it will be worth investing their money into a particular corporate or a company.

In addition to that, the presence of free cash flow tells an investor that a company has cash to expand, develop new products, buy back stock, pay dividends, or even reduce its debt. High or rising free cash flow is often a sign of a healthy company that is thriving in its current environment.

Also, investors should note that free cash flow relies heavily on the state of a company’s cash from operations, which in turn is heavily influenced by the company’s net income.

I you’re an investor and contemplating on how best to invest your money into a corporate institution or a particular company that will bring you some good income, I recommend you watch this video as well.

 

 

Investors should also be aware that companies can influence their free cash flow by lengthening the time they take to pay the bills (thus preserving their cash), shortening the time it takes to collect what’s owed to them (accelerating the receipt of cash), and putting off buying inventory (again, preserving cash).

Equally, it is vital to note that companies have some leeway about what items are or are not considered capital expenditures, and the investor should be aware of this when comparing the free cash flow of different companies.

However, it is also important to keep in mind  that negative free cash flow is not bad in itself. Rather,  if free cash flow is negative, it could be a sign that a company is making bigger investments, which will in turn earn a high return, the strategy has the potential to pay off in the long run.

 

So Is Free Cash Flow A  Scam?

As it has been clearly and nicely expressed, Free Cash Flow is not a scam, but rather, a system used by corporate institutions or companies to calculate their Cash Flow or net income by subtracting their capital expenditure from their operating cash flow, that is their total cash, as shown in the formula above..

So, a company’s cash flow allows investors to determine if it is worth it putting their money into a particular business or corporate organization.

If you’re an investor and want to know and understand how Free Cash Flow Works and how to use it, I am pretty sure that you now have an answer to your question.

Yes, as you have rightly read, Free Cash Flow is not s any scam, but rather a way of finding how much net profit or revenue a company is able to generate by using the formula show above.

 

Are You Really Interested in Building Your on successful business online that will generate for you some regular income while at home? Did you know that there is a platform where you ca learn step by step through video training on how to build your own business website and make some income out of it.

Yes, check my NO.1 recommendation below. And the good news is that you can learn all these for free. Check it below.

 

<<<Claim Your Own Free Membership Now and Start Building a Business Online the that Will Make You Be Your Own Boss Online While at Home>>>

 

 

About the Author

Stephen
     Stephen

I’m Stephen, the founder of Jobs Online-Stephen.com. If you have have read my “About Me Page”, you will understand that  my goal is to help others succeed online as I’m doing, by exposing scams and reviewing top rated products. I can help you start your online business

 

 

 

Surely, you can learn how to make money online while doing what you are really passionate about.

 

My best  wishes to you,

 

Stephen.

 

6 thoughts on “Is Free Cash Flow a Scam? or Is It Legitimate? Find Out Here”

  1. Hi there – I’m someone that really enjoys the world of accounting and finance, so the free cash flow terminology is not new to me. I really like the way you define the concepts and use some good examples to explain it.

    It’s definitely a great way to learn more about a company and it’s ability to generate cash, and therefore stay in business! I think it can definitely give you some insight in determining whether you want to invest in a business or not. I made that mistake earlier in my life when I started investing in individual stocks and bought stock in a company that ended up going bankrupt. If only I’d looked more closely at their financial statements to get a better picture of their solvency!

    Thanks for sharing your insights and knowledge. Hopefully we can all become better investors for the future!

    1. Hi Jen,

      I am also happy to hear you that you’re someone who enjoys accounting and so you already know somwthing about Free Cash Flow. As you mentioned in your comment, it will be a very big mistake for someone to invest into a company or a business without first knowing their Cash Flow.

      Such a person could end up totally disappointed since he could loose all money potentially. So indeed knowing first the Free Cash Flow of any business opportunity or corporate before investing in it is so essential. I am sorry to hear that you made such a mistake of buying stock in a company that ended up in bankrupt.

      Thanks for your comment and for sharing your experience. I hope that all who are interested in business opportunities and want to make some investment will learn something from your mistake.

  2. Yes I can see how that working capital it’s not an easy proposition. Since working capital as a number of factors, it’s important to entail all the expenses that and cash flow. If this is not done correctly, it will especially help investors to know whether a business will survive, bring some good income and even if it is worth investing their valuable asset into such a business. 

    It will also be fine going to school to learn new things is recommended as well

    1. Hello Andrews,

      I agree with you perfectly, investors surely need to use Free Cash Flow to find out whether it is worth investing their money into a particular business or not. If they fail to do so, they may end up wasting their money on a business that will bring them no benefit at all.

      Ad so it is vital that they use the formula as I provided in this review to help them determine how much they can get from a company or a corporate institution or a business.

  3. Thanks for the interesting article on Free Cash Flow. It is obviously a vital thing to know a company’s incoming’s and outgoings when considering whether to invest in them, so using this system could prove very useful.
    But Wealthy Affiliate is by far the best way to build your very own online business. 

    The training is fantastic and the support is always there when you need it, making it easy for anyone to build a successful business. It is also very affordable.

    1. Hello Stefanie,

      Thank you too for dropping by and for reading this article on as to whether Free Cash Flow is a scam or something legitimate. I wrote this article especially who are interested in investing into Forex Trading Brokers. Finding the right and the best Broker has always been a big problem, however with the help the Free Cash Flow System, you will be able to know whether a particular Trading platform or other business is better.

      I also appreciate your comment on Wealthy Affiliate and for recommending it to all my readers online. It is my NO.1 recommendation as well. To all who are interested in making some successful income online.

Leave a Reply

Your email address will not be published. Required fields are marked *