Free Cash Flow FAQ
Quick answers to the most common questions about Free Cash Flow. For the full definition, formula, and benchmarks, see the Free Cash Flow glossary page.
What is Free Cash Flow?
Free Cash Flow is operating cash flow minus capital expenditures: the cash left over after running the business and maintaining its assets. It funds growth, buybacks, debt repayment — or, for startups, determines how fast the runway shrinks.
How do you calculate FCF margin?
Divide free cash flow by revenue for the same period. $400K of FCF on $2M of revenue is a 20% FCF margin — the profitability number most commonly used in the Rule of 40.
Why does FCF matter for SaaS valuations?
Public SaaS investors increasingly price efficiency: FCF margin feeds the Rule of 40, and durable FCF generation supports premium revenue multiples.
Keep exploring Free Cash Flow
Free Cash Flow is the cash a company generates after operating expenses and capital expenditures — the cash actually available to fund growth, repay investors, or extend runway. Read the full Free Cash Flow definition for formulas, benchmarks, and common mistakes.