Levered Free Cash Flow

The Levered Free Cash Flow shows you the amount of cash available to pay shareholders after it has paid its debt. It can be a very important figure.

The formula looks like this

(Cash flow from operations) – (Capitol expenditures)

This number is very important because unlike earnings or income statements, which can be easily tweaked, it is very hard to manipulate cash flow.

It is also important because the amount of cash a company has after paying its bills can be used to help make shareholders money. For example a company can use their earning to reinvest in the company and/or to give out money to their shareholders as dividends.

If a company does have a high levered free cash flow makes sure it is best to find one that pays out dividends as well as reinvest in itself. You do not want to invest in a company with lots of cash flow but foolishly spends it.