Free Cash Flow For the Firm question

[jiminssy]

Probably may not be accounting related...
I was reading the Investopedia article "Free Cash Flow For The Firm - FCFF"
I can't link URLs here just yet but if you google it, you should be able to find the page.

and I got stuck on understanding this formula

FCFF = Operating Cash Flow - Expenses - Taxes - Changes in NWC - Changes in Investments

What exactly does Operating Cash Flow mean?
Why do we consider the delta of NWC and Investments and not the actual amounts?

 

[Counterofbeans]

Free Cash Flow---one of the most dubious, worthless calculations out there. There are so many variations, I don't even know if there is one generally accepted definition. Most I have seen play games with interest expense, income tax expense and depreciation/amortization expense, as if those aren't, "legitimate" cash flows or something.

In any case...

Operating cash flow is likely all transactions and events that aren't defined as investing or financing activities. These activities often include producing and delivering good and providing services. Further, these are generally the cash effects of transactions and other events that enter into the determination of net income.

See the statement of cash flows for this number.

And the reason you'd want to take the chance in NWC is because, for whatever the reason, that's likely less, "cash" available for distribution to, say, shareholders.