Capital Expenditures, or any investments we have to make.

And then finally, we're going to subtract off the Change in Net Working Capital.

And that sometimes throws people for a little bit.

What do you mean subtract off the Change in Net Working Capital?

Well first, what is Net Working Capital?

Well, Net Working Capital, NWC, is equal to,

current, yeah that's supposed to be a u,

current assets minus current liabilities.

And current assets, that's loosely,

cash plus accounts receivable plus inventory.

And current liabilities, we're going to focus on accounts payable.

Now some of you might say,

what about short-term debt or long-term debt that's coming due?

That's financing.

Leave that aside.

That's a separate issue.

We'll talk about that in a little bit.

Okay So, what goes into the free cash flow calculation is not net working capital.

The change is important, because these are all what economists call stock variables,

and we're trying to compute flows.

So, we want to look at the change, the period over period change in net working

capital, and subtract that from free cash flow.