Free cash flow margin
Also known as: FCF margin
A margin is a profit number expressed as a percentage of revenue. It tells you how many cents of each sales dollar the company keeps at a given point on the income statement.
Free cash flow margin measures what percentage of revenue is left as actual cash after the company has paid for the capital expenditures needed to maintain and grow the business. It answers the question: how much cash can the company actually distribute to shareholders or reinvest?
The formula is: Free cash flow / Revenue × 100 = Free cash flow margin (Operating cash flow - Capital expenditure) / Revenue × 100 = Free cash flow margin
High free cash flow margin means the business generates cash efficiently and requires little reinvestment to keep running. Low or negative free cash flow margin can signal a cash-hungry business or a company in heavy growth mode.