Free Cash Flow (FCF)

Free Cash Flow (FCF) represents the cash a company generates from its core operating activities after accounting for capital expenditures (CapEx) necessary to maintain or expand its asset base. It reflects the actual cash available for debt repayment, dividend distribution, reinvestment, or reserve building.

The formula for calculating Free Cash Flow is:

FCF = Operating Cash Flow – Capital Expenditures

This is a crucial financial metric for investors, lenders, and company leadership because it illustrates the company's ability to:

• Fund organic growth

• Support dividend payouts or share buybacks

• Pay down existing debt obligations

• Pursue acquisitions or strategic initiatives

FCF is considered a purer measure of profitability and financial flexibility than net income, as it accounts for working capital needs and capital investments.

In capital-intensive industries like real estate, logistics, or manufacturing within the UAE and GCC, monitoring FCF is vital for ensuring liquidity amid significant upfront infrastructure investments.