Free Cash Flow (FCF)

The cash a company generates from operations after subtracting capital expenditures -- essentially the money left over that can be used to pay dividends, buy back shares, reduce debt, or fund acquisitions. Free cash flow is considered by many investors to be a more reliable measure of financial health than net income because it is harder to manipulate with accounting tricks. Warren Buffett uses a variant he calls "owner earnings" as the cornerstone of his valuation approach.