Free cash flow (FCF) is the cash a company generates from its operations after subtracting capital expenditure — the money actually left over to pay dividends, reduce debt, or reinvest in the business, as opposed to net profit, which is an accounting figure.
For example, a company with RM80 million in operating cash flow that spends RM30 million on capital expenditure that year has RM50 million in free cash flow — that’s the real cash available to shareholders and creditors, regardless of what net profit shows.
Free cash flow is particularly useful for checking whether a dividend is actually funded by cash the business generates, rather than by borrowing. See how to screen for dividend stocks for how free cash flow coverage fits into evaluating dividend sustainability.