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Free cash flow (FCF) is your net cash from operations, minus the money you spend on capital expenditures — long-term assets, such as property or equipment. Your FCF can be important for understanding your company’s financial health, because it’s also the money you’ll use to repay creditors, pay shareholders, or reinvest in your business. 

A positive FCF can indicate your business has more than enough money to cover its expenses, which can be a sign of financial health. However, a low or negative FCF isn’t necessarily bad, especially when you’re focused on growth. A negative FCF is the same as a positive burn rate.

There are different ways to measure FCF, but one of the simplest is to subtract your capital expenditures (CapEx) from the cash you earned from operations. You can find these on your cash flow statement — they’re the net cash from operating activities and the CapEx under the investing activities.