Concept guide · Corporate Finance
Revenue, Capital Expenditure & Free Cash Flow
Follow operating profit, operating cash generation and the investment required to sustain growth.
The accounting distinction
Revenue measures sales, operating income is an earnings measure, and operating cash flow is cash from business operations. Capital expenditure funds long-term assets; free cash flow deducts qualifying investment outlays.
Why markets care
A company may grow rapidly while spending more on capacity than current cash operations generate. That is not automatically distress or proof the investment will ultimately pay off.
Questions to ask
Compare investment against future utilisation, margins, funding, depreciation and return on invested capital. Distinguish quarter figures from trailing-twelve-month measures.
Reported results, management guidance and analyst expectations
Reported results cover a completed period. Guidance describes management’s forward expectations. Analyst consensus summarises an identified group of forecasts captured at a specified time. Compare the same fiscal period, currency, diluted-share basis and accounting definition. A strong historical quarter can accompany weaker guidance or poor cash conversion, and an earnings beat does not guarantee a rising share price.