FOCF (Free Operating Cash Flow)
Corporate Credit Analysis glossary · Financial Statement Analysis & Cash Flow Dynamics
Definition
CFO less capex. The S&P methodology label for free cash flow available before discretionary uses (dividends, M&A) and debt service beyond interest.
FOCF (Free Operating Cash Flow) in plain English
FFO tells you the cash a business generates, but a company also has to spend money just to keep its machines and buildings running, and that spending is called 'capex' (capital expenditures). FOCF takes the cash from operations and subtracts that necessary equipment spending, leaving the cash that is genuinely 'free' before the company chooses what to do with it. Imagine you earn $200 mowing lawns but must spend $50 fixing your mower, so your $150 left over is your FOCF. That leftover is what's actually available to pay down debt, hand out dividends, or buy other companies, which is why lenders watch it closely.
Also called: Free Operating Cash Flow
Learn these first
Related Corporate Credit Analysis terms
Corporate Credit Analysis practice questions · Corporate Credit Analysis flashcards · Corporate Credit Analysis study guide