How to Answer: What is free cash flow and what does it tell about a company's finances?
Advice and answer examples written specifically for a Finance Manager job interview.
15. What is free cash flow and what does it tell about a company's finances?
How to Answer
Free Cash Flow (FCF) is the cash a company generates from operations less expenditures for capital expenditures and other assets. FCF is a measure of profitability, and it tells investors how much cash is available for a company to repay creditors or pay dividends. At many organizations, a Finance Manager may be required to forecast and report on free cash flow. Even if not, it's still important for the candidate to know what free cash flow is.
Written by Brian Schuchart on January 1st, 2021
Answer Example
"Free Cash Flow is a measure of a company's profitability, but unlike net income it focuses on how much cash the company generates from operations after adjusting for spend on capital expenditures and other assets. Cash is king, and free cash flow tells investors how much money is available for dividends and payments to creditors. Low or unhealthy Free Cash Flow would be a concern for many investors."
Written by Brian Schuchart on January 1st, 2021
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