In the business activities of an enterprise, fixed assets, intangible assets, deferred assets and other assets that have been used for a long time and whose economic life will experience multiple accounting periods should be regarded as capital expenditures.
That is, capitalization first forms fixed assets, intangible assets and deferred assets. Then use the benefits they provide for enterprises to resell as expenses in various accounting periods. Such as depreciation of fixed assets, amortization of intangible assets and deferred assets.
Free cash flow is the residual cash flow generated by the enterprise after meeting the reinvestment demand. This part of cash flow is the maximum cash amount that can be allocated to enterprise fund suppliers without affecting the company's sustainable development.
Simply put, free cash flow (FCF) refers to the difference between cash flow generated by business activities and capital expenditure (ce).
Namely: FCF=OCF-CE. Free cash flow is a financial method, which is used to measure the cash actually held by an enterprise that can return shareholders. Refers to the maximum amount of cash that can be distributed to shareholders (and creditors) without endangering the survival and development of the company.