Dr. Paul Borosky, DBA, MBA
Business Consultant & Author
Guide 21 of 34 · The Cash Flow Statement
How to Calculate Free Cash Flow (Apple Example)
One subtraction. The number investors watch most.
Operating cash flow minus capital expenditures. That is the whole formula. What it reveals is the cash a company is truly free to spend on dividends, buybacks, debt, or acquisitions. Apple produced between $93.0 billion and $111.4 billion of it every year from 2021 to 2025.
Last Updated: 10/27/2026 · Written by Dr. Paul Borosky, DBA, MBA
The Short Answer
What Is Free Cash Flow, and How Do You Calculate It?
Textbook Definition
Free cash flow is cash from operating activities minus capital expenditures. It measures the cash a company generates after paying for its operations and the long-term assets needed to maintain and grow them.
In Plain English
Operating cash is what the business earns in real money. Capex is what it has to reinvest to keep going. Free cash flow is what is left for the owners. Big and growing means options. Small or negative means none.
Free Cash Flow
Cash from Operating Activities − Capital Expenditures
Apple, fiscal 2025: $98.8B
Both numbers sit on the cash flow statement. Operating cash is the operating section total. Capex sits in the investing section, often labeled payments for acquisition of property, plant, and equipment.
One Real Company
Apple’s Free Cash Flow, 2021 to 2025
Capex barely moves. Operating cash swings a little. Free cash flow stays enormous every single year.
| Line | 2025 | 2024 | 2023 | 2022 | 2021 |
|---|---|---|---|---|---|
| Cash from operating activities | 111,482 | 118,254 | 110,543 | 122,151 | 104,038 |
| Capital expenditures | (12,715) | (9,447) | (10,959) | (10,708) | (11,085) |
| Free cash flow | 98,767 | 108,807 | 99,584 | 111,443 | 92,953 |
| Revenue | 416,161 | 391,035 | 383,285 | 394,328 | 365,817 |
| Free cash flow as % of revenue | 23.7% | 27.8% | 26.0% | 28.3% | 25.4% |
Source: Apple Form 10-K filings, fiscal 2021 to 2025, as analyzed in the book. $ millions. Last row calculated from the lines above.
The Method
How to Use Free Cash Flow in 5 Steps
Pull two lines from the cash flow statement.
Operating cash total and the capex line inside investing. Do not use the investing total; it includes securities trades.
Subtract.
Operating cash minus capex. Keep the sign straight: capex is shown in parentheses as cash going out.
Compare it to revenue.
Free cash flow ÷ revenue shows how much cash each sales dollar leaves. Apple: 23.7% in 2025, 28.3% at the 2022 peak.
Follow where it goes.
Check the financing section. Dividends, buybacks, and debt payments are paid from free cash flow.
Watch the trend, not one year.
Rising free cash flow funds the future. Apple’s dipped in 2025 as capex rose to $12.7 billion and operating cash eased.
Why Apple’s Is So Large
Apple outsources most of its manufacturing. It does not have to sink huge sums into factories, so capex stays at $9 billion to $13 billion a year against operating cash above $100 billion. Analysts call this asset-light. Asset-light companies turn more of their cash into free cash flow for their owners.
Compare It
Apple vs. Microsoft: Same Engine, Different Leftovers
Microsoft’s operating cash flow is comparable to Apple’s. Its free cash flow is meaningfully lower. The reason is capex: Microsoft is building data centers for cloud and artificial intelligence, and its property, plant, and equipment has more than tripled in five years.
| Latest fiscal year | Apple | Microsoft |
|---|---|---|
| Operating cash flow | $111.5B | about $120B |
| Capital spending | $12.7B | many times Apple’s |
| Free cash flow | $98.8B | meaningfully lower |
Microsoft comparisons as described in the book. Microsoft’s fiscal year ends in June.
Two companies with identical operating cash can end up with very different free cash flow. That is why this is the number to watch, not operating cash alone.
Beginner Traps
What Do Beginners Get Wrong About Free Cash Flow?
- Subtracting the whole investing total instead of just capex.
- Assuming low capex is always good. Some industries must spend heavily.
- Ignoring a single year’s dip without checking why capex rose.
- Confusing free cash flow with net income.
- Forgetting that capex shows as a negative number on the statement.
- Judging free cash flow without knowing where it went.
How the Book Grades the Pieces
From the Book
One of the Most Important Numbers in Finance
Cash Flow Statement · Free Cash Flow
Delightfully Simple
Free cash flow is, in my opinion, one of the most important numbers in all of financial analysis, and it is delightfully simple.
Free cash flow, payouts, and every ratio that depends on them, all run on Apple and graded. It is in the book.
Get the Book on Amazon →Your Business, Your Free Cash
Owners feel free cash flow every time they buy a truck or a machine. Before you spend it, decide what to hold back: see how much cash reserve a small business needs. Raising money for equipment? Lenders want projected cash flow in your plan. See business plan writing services.
Beyond the Book
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Free Cash Flow Questions
What is the formula for free cash flow?
Is free cash flow the same as net income?
Can free cash flow be negative?
What do companies do with free cash flow?
Keep Going
Related Guides
See every section of the cash flow statement in the cash flow statement guide.
Written by Dr. Paul Borosky, DBA, MBA, business consultant, author, and adjunct finance instructor with an MBA focused in finance.
This page is for general educational purposes only. It is not investment, financial, tax, accounting, or legal advice, and nothing here is a recommendation to buy or sell any security. Apple and Microsoft figures come from their public filings as analyzed in the book. Apple and Microsoft are trademarks of their respective owners, and this page is not affiliated with or endorsed by either company.