This is the cash flow that is left once a firm’s operating cash flow (the cash it generates from the heart of its trading operations as shown towards the top of a cash flow statement) has been adjusted for non-discretionary payments such as the interest on debt and the tax bill.
It is also common to adjust the number for the capital expenditure required annually to maintain a firm’s business operations. Free cash may be used by the directors to pay a large dividend, invest in new operations or even pay for a share buyback. As such it is a key number for investors.