Table:
|  | 2019 | 2018 |
| --- | --- | --- |
| Cash flows from operating activities | 7,958 | 7,384 |
| Capital expenditures | (3,988) | (3,971) |
| Cash dividends paid on preferred shares | (147) | (149) |
| Cash dividends paid by subsidiaries to NCI | (65) | (16) |
| Acquisition and other costs paid | 60 | 79 |
| Voluntary DB pension plan contribution | – | 240 |
| Free cash flow | 3,818 | 3,567 |
Paragraphs:
FREE CASH FLOW AND DIVIDEND PAYOUT RATIO
The terms free cash flow and dividend payout ratio do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers.
We define free cash flow as cash flows from operating activities, excluding acquisition and other costs paid (which include significant litigation costs) and voluntary pension funding, less capital expenditures, preferred share dividends and dividends paid by subsidiaries to NCI. We exclude acquisition and other costs paid and voluntary pension funding because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring.
We consider free cash flow to be an important indicator of the financial strength and performance of our businesses because it shows how much cash is available to pay dividends on common shares, repay debt and reinvest in our company. We believe that certain investors and analysts use free cash flow to value a business and its underlying assets and to evaluate the financial strength and performance of our businesses. The most comparable IFRS financial measure is cash flows from operating activities.
We define dividend payout ratio as dividends paid on common shares divided by free cash flow. We consider dividend payout ratio to be an important indicator of the financial strength and performance of our businesses because it shows the sustainability of the company’s dividend payments.
The following table is a reconciliation of cash flows from operating activities to free cash flow on a consolidated basis.
Question:
How is free cash flow defined?
Answer: cash flows from operating activities, excluding acquisition and other costs paid (which include significant litigation costs) and voluntary pension funding, less capital expenditures, preferred share dividends and dividends paid by subsidiaries to NCI