What is the definition of a Free Cash Flow (FCF)?

Free cash flow is a measure of how much money is available to investors through the operations of the business after accounting for expenses of the business such as taxes, operational expenses and capital expenditures. Free cash flow comes in 2 forms, levered and unlevered:

Free Cash Flow is extremely useful in LBO modeling as it shows how much cash the company will have to pay off the debt used to finance the buyout. Unlevered FCF is the more commonly used of the two.