Glossary
What is free cash flow (FCF)?
Definition
Free cash flow (FCF) is cash from operations minus capital expenditure: the cash a business generates in a period after paying for property, plant and equipment. For example, PepsiCo's free cash flow for FY2025 (ended 27 Dec 2025) was USD 7.67 billion, our calculation from its Form 10-K.
Formula
Free cash flow = Cash from operations − |Capital expenditure|
Free cash flow takes both of its inputs from the cash flow statement, for the same period. Cash from operations, also called operating cash flow, is the subtotal that ends the operating section of that statement. Capital expenditure, or capex, sits in the investing section, as payments for property, plant and equipment.[1]
Capital expenditure is a cash outflow, so our table shows it with a minus sign. The formula uses the amount without that sign, which is what the bars around capital expenditure mean. A negative result means capital expenditure was larger than cash from operations. Free cash flow adds up cash over a whole period, while net debt is a balance at its end.
Worked example: PepsiCo
This example builds free cash flow from PepsiCo's cash flow statement for its latest fiscal year, as filed in its Form 10-K. Cash from operations is the line PepsiCo prints as net cash provided by operating activities. Capital expenditure is the line it prints as capital spending. To get free cash flow, subtract capital expenditure, without its minus sign, from cash from operations.
The result carries the D marker (derived by StockFactsheet), because free cash flow is not a line in the statement. How to read a 10-K uses the same PepsiCo cash flow statement for its worked example.
| USD m | FY2025ended |
|---|---|
| Cash from operations | 12,087 |
| Capital expenditure | −4,415 |
| Free cash flow | 7,672 D |
Source: PepsiCo Form 10-K for FY2025, SEC EDGAR
- D Free cash flow = cash from operations minus capital expenditure.
Totals may not add up because of rounding.
All periods: PepsiCo cash flow statement
How StockFactsheet calculates it
StockFactsheet calculates free cash flow from both inputs as reported, with no adjustment for acquisitions, leases or one-off items. Cash flow lines are often filed only year to date, so we derive quarters by subtraction. A trailing 12 months (TTM) figure is the sum of 4 contiguous quarters.
Under IFRS, lease principal payments sit in financing, so they are not deducted from free cash flow. Interest paid follows each issuer's classification, so IFRS and US GAAP free cash flow are not like for like. We also use free cash flow in FCF cover, which compares it with dividends paid. The full rule is in our methodology for free cash flow.
Common mistakes
- Starting free cash flow from net income instead of cash from operations: net income includes non-cash items such as depreciation and ignores the cash effect of working-capital changes.[1]
- Summing the capital expenditure of year-to-date 10-Q columns: as how to read a 10-Q explains, each column includes the earlier quarters, so they are counted more than once.
- Treating free cash flow as cash free for any use: SEC staff note that many companies have mandatory debt service and other required spending that the measure does not deduct.[2]
- Comparing a company's own free cash flow with ours as if they matched: SEC staff guidance says the measure has no uniform definition, so the inputs can differ.[2]
Sources and data
The references explain the term; the worked example's figures are as reported in the filings after them. Derived figures are our calculations (see Methodology).
(opens in new tab)- [1] Reference Beginners' Guide to Financial Statements
- [2] Reference Non-GAAP Financial Measures
- [3] Filing Form 10-K, fiscal year ended 27 Dec 2025
- [4] Our dataset StockFactsheet fundamentals dataset, extracted from SEC EDGAR XBRL on ; derived values (Q4, TTM, free cash flow, net debt, margins, growth rates and ratios) are explained in Methodology.
Cite this page
StockFactsheet (2026). "What is free cash flow (FCF)?" Signed off by OffScriptBySami. Updated ; data as of . https://stockfactsheet.com/learn/free-cash-flow/
For information only. StockFactsheet does not recommend buying, selling or holding any security. Figures can contain errors; always check the original filings. Full disclaimer
Update history
- Published First published version.