Finance Lesson 3: Free cash flow

SheetDrill Finance Finance Lesson 3 · Free cash flow

Fundamental · Lesson 3

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Finance Lesson 3 done.

You can read a cash flow statement, compute free cash flow and its margin, check how much profit turns into cash, follow where the cash went and compute an FCF yield. Next in fundamental analysis: the balance sheet.

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What you're learning

Profit isn't cash. Net income counts sales when they're made and spreads equipment costs over years; the cash flow statement starts from net income and adjusts it to the cash that really moved.

Free cash flow = cash from operations − capital expenditures: the cash left after running and reinvesting in the business. It pays for dividends, buybacks, debt and acquisitions, and it's what a DCF values.

Figures are from Apple's fiscal 2022 10-K (SEC accession 0000320193-22-000108). Educational content, not investment advice.