Free Cash Flow/Operating Cash Ratio (Free cash flow /Operating cash flow)
The free cash flow/operating cash flow ratio measures the relationship between free cash flow and operating cash flow.
Free cash flow is most often defined as operating cash flow minus capital expenditures, which, in analytical terms, are considered to be an essential outflow of funds to maintain a company's competitiveness and efficiency.
The cash flow remaining after this deduction is considered "free" cash flow, which becomes available to a company to use for expansion, acquisitions, and/or financial stability to weather difficult market conditions. The higher the percentage of free cash flow embedded in a company's operating cash flow, the greater the financial strength of the company.
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