Free cash flow is defined as

Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter12: Valuation: Cash-flow Based Approaches
Section: Chapter Questions
Problem 5QE
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Free cash flow is defined as

 

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    cash flows available for payments to stockholders and debt holders of a firm after the firm has made payments necessary to vendors.

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    cash flows available for payments to stockholders and debt holders of a firm after the firm has made investments in assets necessary to sustain the ongoing operations of the firm.

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    cash flows available for payments to stockholders and debt holders of a firm that would be tax-free to the recipients.

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    cash flows available for payments to stockholders of a firm after the firm has made payments to all others with claims against it.

Expert Solution
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The Company should have Sufficient cash to run its Operations which are very important and key for any business to grow. So company should know how much free cash flow it has for the Payment of the Debts, Payment to shareholders.

So in others words any cash left after the payment for the Operations and Capital Expenditure will be Treated as the Free Cash flow

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