Free cash flow

Hey little one! Do you know what money is? It's a thing we use to buy stuff! We can save money, spend money, and sometimes even earn money. Companies have money too, and they earn it by selling products or services to people like you and me.

Now, let's talk about free cash flow. Free cash flow is a way we can understand how much extra money a company has after it has paid for things like salaries, rent, and equipment. Just like you have to pay for your food, clothes, and toys, companies have to pay for things they need to run their business smoothly.

When a company makes money, it subtracts all the costs it had to pay for to run the business, and whatever is left is called Free Cash Flow. It's like how you get your allowance, but after you pay for your toys and candies, the leftover money is your free cash flow.

Why is free cash flow important? Well, it helps us understand if a company is doing well and if it can invest in things like new buildings, products, or giving back to shareholders like you and me.

So when we look at a company's free cash flow, we can see if it has extra money to do more things or if it needs to cut down on its costs. Just like how you would have to save your allowance if you wanted to buy a big toy, companies need to have enough free cash flow to invest in new things, grow their business, and keep everyone happy.