What does Free Cash Flow measure?

Free Cash Flow is a crucial financial metric that indicates the amount of cash a company generates after accounting for capital expenditures necessary to maintain or expand its asset base. It measures the cash that is available for distribution to stakeholders, such as investors and creditors, after the company has funded its core operations and any significant capital investments.

This measurement is particularly important because it provides insight into a company's financial health and its ability to generate surplus cash that can be used for various purposes, such as paying dividends, reducing debt, or reinvesting in the business. By considering both operational costs and capital expenditures, Free Cash Flow delivers a more accurate picture of the cash available for a company to utilize, beyond just its revenues or profits.

The other choices focus on different financial aspects, such as net income or revenue, but they do not capture the essential evaluation of cash flow after accounting for investment needs and operational costs, which is the essence of Free Cash Flow.