What is free cash flow?
Free cash flow is the cash a business's operations brought in, minus what it spent on property and equipment. It is not a GAAP measure (GAAP is the US accounting rules), and it has no uniform definition.[S1]
How is free cash flow worked out?
Cityfort uses one formula for every US company: cash from operations minus purchases of property and equipment (capex).
Costco's cash from operations was $15.8B (FY2026). Its capex was $6.4B (FY2026). That leaves free cash flow of $9.4B (FY2026).
A company's own version may subtract more. Meta's third-quarter 2026 release also subtracted principal payments on finance leases.[S4]
Where do you find it in a 10-K or 10-Q?
Both inputs sit in the statement of cash flows. In a 10-K, that is in Item 8, "Financial Statements and Supplementary Data".[S2]
In a 10-Q, it is in Part I, Item 1.[S3] It runs from the start of the fiscal year to the quarter's end.[S5]
Cash from operations closes the "operating activities" part. Capex sits under "investing activities".[S6] Amazon's 10-K labels it "Purchases of property and equipment".[S7]
The SEC staff says a company's own figure should come with a reconciliation to GAAP.[S1] See non-GAAP measures.
What does free cash flow leave out?
- Required payments. Debt repayments and other required spending are not subtracted. The SEC staff says the measure should not imply it is cash free for any use.[S1]
- Pay given in shares. Stock-based pay is added back to reach cash from operations, because no cash left.[S7] See stock-based pay and dilution.
- Buying other businesses. Acquisitions sit in investing activities but are not capex.[S7]