What is Free Cash Flow?
FCF ≈ operating cash flow minus capital expenditures. Funds dividends and buybacks.
Formula
Free Cash Flow = Operating Cash Flow - Capital Expenditures Example: Operating Cash Flow: ₹500 crore - Net Income: ₹400 crore - Add: Depreciation: ₹80 crore - Add: Working capital changes: ₹20 crore Capital Expenditures: ₹150 crore - Maintenance CapEx: ₹80 crore - Growth CapEx: ₹70 crore Free Cash Flow = 500 - 150 = ₹350 crore This is cash available for: - Dividends, buybacks, debt repayment, acquisitions
Indian market context (NSE)
Reference levels: Nifty 50 at 24,300, Reliance Industries at ₹1,300, Bank Nifty futures at 55,000 (lot size 30). Examples below show how Free Cash Flow shows up on Indian index, equity, and futures books — update to live quotes in your journal.
Nifty 50 perspective
Nifty at 24,300: index-level free cash flow aggregates 50 names — useful macro filter for allocation, less useful for Bank Nifty scalps the same afternoon.
Reliance Industries perspective
Free Cash Flow for Reliance at ₹1,300: pull from latest exchange filings and investor presentation — compare to Nifty 50 median for context, not as a timing signal for intraday futures.
How to validate
- Validate Free Cash Flow trades against the published event calendar.
- Separate earnings trades from non-event technical tags in analytics.
- Re-read news source in journal note to avoid hindsight bias in review.
- Compare results only within the same market regime (bull/bear/sideways).
How to track in TradeLyser
- Link trade to catalyst note (event, date, source) in comments.
- Tag “event trade” vs “technical only” before entry.
- Calendar review after results season for tag-level P&L.
- Export event-tagged trades for annual tax and process reconciliation.
Best practices
- Trade smaller into unknown event risk around Free Cash Flow.
- Verify source quality before tagging fundamental triggers.
- Do not retrofit fundamental narratives onto technical entries.
- Keep investment and trading books separate in analytics.
Common pitfalls
- Trading headlines without time-stamped journal proof.
- Holding losers because the “story” behind Free Cash Flow must recover.
- Mixing tax-loss harvesting with active trading tags.
- Using stale data after earnings revisions.
How to use this in TradeLyser
Record FCF trend in long-hold journal; separate from intraday trading tags.
Reference guide
| Context | Value | Reading |
|---|---|---|
| FCF > Net Income | Strong cash conversion | Positive signal |
| FCF = Net Income | Normal operation | Expected |
| FCF < Net Income | Cash tied in working capital | Investigate |
| Negative FCF | Burning cash | Check if intentional growth |
Related terms
Dividend yield = annual dividend per share ÷ share price × 100.
Earnings per share is net profit attributable to common shareholders divided by shares outstanding.
EBITDA approximates operating cash earning power before capital structure and accounting D&A.
ROE = net income ÷ shareholders equity × 100. Shows capital efficiency.
FAQ
FCF per share vs total?
Per share for comparability across names.
FCF for event trades?
Short-term trades rarely need FCF — tag horizon.
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