Rule of 40
Revenue growth plus free-cash-flow margin — a software-industry heuristic for balancing growth and profit.
Formula
Rule of 40 = Revenue growth % + FCF margin %
How to read it
Above 40 is the conventional bar.
How to use it
A quick screen for software companies.
Limitations
Not meaningful outside high-growth software; withheld for banks.
Also called: rule of 40.