What is the definition of "free cash flow"?

Free cash flow is defined as the cash generated by a company's operations that is available to be distributed to investors, including shareholders and debt holders, after accounting for capital expenditures necessary to maintain or expand its asset base. This metric is crucial because it provides a clear picture of the cash that a company can generate after fulfilling its operating expenses and reinvestment needs.

This cash can be utilized for various purposes, such as paying dividends, repaying debt, or reinvesting in growth opportunities. By focusing on cash generation rather than net income, free cash flow gives a more realistic view of the financial health of a company and its ability to fund operations and provide returns to investors.