Free Cash Flow For The Firm - FCFF

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What is 'Free Cash Flow For The Firm - FCFF'

Free cash flow for the firm (FCFF) is a measure of financial performance that expresses the net amount of cash that is generated for the firm, after deduction of expenses, taxes and changes in net working capital and investments.

Calculated as:

 

 

FCFF = CFO + Interest Expense ( 1 - Tax Rate ) - Capex 

 

BREAKING DOWN 'Free Cash Flow For The Firm - FCFF'

This is a measurement of a company's profitability after all expenses and reinvestments. It's one of the many benchmarks used to compare and analyze financial health.

A positive value would indicate that the firm has cash left after expenses. A negative value, on the other hand, would indicate that the firm has not generated enough revenue to cover its costs and investment activities. In that instance, an investor should dig deeper to assess why this is happening - it could be a sign that the company may have some deeper problems.

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RELATED FAQS
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  2. How do I discount Free Cash Flow to the Firm (FCFF)?

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  5. What will examining a company's cash flow from operating activities tell an investor?

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