Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business. At the most fundamental level, a company’s ability to create value for shareholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow (FCF).

PSON Free Cash Flow Analysis

Free cash flow, a measure commonly used by analysts to assess a company's profitability, represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets.

The Free Cash Flow is calculated using a number of methods including using Operating Cash Flow. Following is the formula to calculate Free Cash Flow based on Operating Cash Flow.

Free Cash Flow = Operating Cash Flow - Capital Expenditures

Using above formula to calculate Free Cash Flow for Pearson plc (PSON), the free cash flow value is 262.00M.

All amounts in GBP

Operating Cash
326M
Capital Expenditure
-64M
Free Cash Flow
262.00M

Pearson plc has a positive free cash flow as per the latest annual Cash flow statement released by the company. Positive free cash flow is cruscial for the financial health of a company, which can be used to pay dividends, expand operations, and deleverage its balance sheet (i.e., reduce debt).

PSON Cash Flow Statement History

Following table shows the history of Cash Flow Statements sheet for Pearson plc (LSE:PSON).

31 Dec 202131 Dec 202031 Dec 201931 Dec 2018
Net Income159M310M264M588M
Depreciation145M193M209M165M
Change To Netincome-99M-196M-155M-443M
Change To Account Receivables-71M-1M59M-15M
Change To Liabilities37M-26M-157M35M
Change To Inventory22M35M-20M-10M
Change To Operating Activities20M-38M54M54M
Total Cash From Operating Activities326M389M369M462M
Capital Expenditures-64M-53M-55M-70M
Investments34M525M-47M22M
Other Cashflows From Investing Activities13M65M34M183M
Total Cashflows From Investing Activities-80M591M-325M211M
Dividends Paid-149M-146M-147M-136M
Net Borrowings-255M24M91M-445M
Total Cash From Financing Activities-414M-299M-102M-729M
Effect Of Exchange Rate-8M-2M-33M-49M
Change In Cash-176M679M-91M-105M
Repurchase Of Stock-16M-182M-52M-153M
Issuance Of Stock6M6M7M6M