Global Advisors | Quantified Strategy Consulting

FCFF

“The interests and incentives of managers and shareholders conflict over such issues as the optimal size of the firm and the payment of cash to shareholders. These conflicts are especially severe in firms with large free cash flows—more cash than profitable investment opportunities.” Michael Jensen Agency Theory Co-founder

Quote: Michael Jensen – “Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers”

Free cash flow (FCF) is the cash a company generates from its operations after it has paid the operating expenses and made the investments required to maintain and grow its asset base. It represents cash available to the providers of capital — equity and debt.

Term: Free Cash Flow (FCF)

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