Agreed that free cash flow can be misleading some cases, and digging a bit deeper helps us understand what those cases are. Free cash flow and net profit shoul

Agreed that free cash flow can be misleading some cases, and digging a bit deeper helps us understand what those cases are. Free cash flow and net profit should equal each other if summed up over the entire lifetime of a company. The trickiness of course comes in the timing of when revenue and expenses are recognized. Whereas a large capital investment hits free cash flow the same year, it only impacts net profit over the course of its depreciation. Free cash flow can be misleading for companies that require a disproportionately large capital investment upfront but negligible expenses thereafter. This can be illustrated by taking an edge case to the extreme: Let’s say a company required a $1,000,000 capital investment in Year 1, $0 in subsequent expenses, and brought in a piddling $1 in annual revenue until it shut down in Year 10. The company would have been free cash flow positive in Year 2 through Year 10, which would be misleading because in fact the company was never profitable and also had negative ($999,999) free cash flow in Year 1.