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I do not understand this definition of FCF to firm, provided in my study text:
“Cash that is not retained and then reinvested in a business is called free cash flow.”
I honestly feel that it should rather be the “cash that IS RETAINED and reinvested in business”
The free cash flow is the cash available for paying to the investors (equity and debt). It is not available if it is used to purchase new assets.
Everything else remaining constant, if the company’s FCF is falling then that means it is reinvesting more and more of its cash flows in Capex, right sir? Which is a good sign for long-term investors.
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