Free Cash Flow To Equity - FCFE

AAA

DEFINITION of 'Free Cash Flow To Equity - FCFE'

This is a measure of how much cash can be paid to the equity shareholders of the company after all expenses, reinvestment and debt repayment.

Calculated as: FCFE = Net Income - Net Capital Expenditure - Change in Net Working Capital + New Debt - Debt Repayment

INVESTOPEDIA EXPLAINS 'Free Cash Flow To Equity - FCFE'

FCFE is often used by analysts in an attempt to determine the value of a company.

This alternative method of valuation gained popularity as the dividend discount model's usefulness became increasingly questionable.

VIDEO

Loading the player...
RELATED TERMS
  1. Capital Expenditure (CAPEX)

    Funds used by a company to acquire or upgrade physical assets ...
  2. Amortization

    1. The paying off of debt in regular installments over a period ...
  3. Unlevered Free Cash Flow - UFCF

    A company's cash flow before interest payments are taken into ...
  4. Discounted Cash Flow - DCF

    A valuation method used to estimate the attractiveness of an ...
  5. Valuation

    The process of determining the current worth of an asset or company. ...
  6. Dividend Discount Model - DDM

    A procedure for valuing the price of a stock by using predicted ...
RELATED FAQS
  1. Besides free cash flow to equity (FCFE), what are other metrics for estimating a ...

    There are several metrics available for estimating a company’s value. In addition to free cash flow to equity (FCFE), there ... Read Full Answer >>
  2. What's the difference between free cash flow to equity and accounting profits?

    The key difference between Free Cash Flow to Equity (FCFE) and Accounting Profit is that while the former calculates the ... Read Full Answer >>
  3. What does free cash flow to equity (FCFE) really tell an analyst?

    Investors are keen to find the right set of metrics to evaluate the performance and likely growth of a company. Free cash ... Read Full Answer >>
  4. What are analysts looking for when they use free cash flow to equity (FCFE)?

    Analysts use free cash flow to equity (FCFE) to determine whether a company has enough cash available to pay its shareholders ... Read Full Answer >>
  5. What are some examples of a deferred tax liability?

    In the United States, laws allow companies to maintain two separate sets of books for financial and tax purposes. Because ... Read Full Answer >>
  6. Why is the use of contra accounts so important for maintaining ledgers?

    Contra accounts have been used in financial accounting to verify the balance of another corresponding account since Renaissance ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Discounted Cash Flow Analysis

    Find out how analysts determine the fair value of a company with this step-by-step tutorial and learn how to evaluate an investment's attractiveness for yourself.
  2. Markets

    Free Cash Flow: Free, But Not Always Easy

    Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery.
  3. Fundamental Analysis

    Taking Stock Of Discounted Cash Flow

    Learn how and why investors are using cash flow-based analysis to make judgments about company performance.
  4. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  5. Investing

    Do Record Stock Highs Signal A Top?

    Despite higher rates, U.S. stocks have been posting new records in recent weeks, despite investor concerns about slowing U.S. corporate profit growth.
  6. Fundamental Analysis

    Online Gaming Industry Stocks

    A look at some of the top stocks in the online gaming industry.
  7. Stock Analysis

    Invest In Cyber Security With These Stocks

    Learn about some amazing cyber security plays in this hot sector.
  8. Personal Finance

    Top Healthcare, Medical Equipment Stocks of 2015

    A short list of the top healthcare and medical equipment stocks of 2015.
  9. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  10. Investing

    What A Rate Hike May Mean For Stocks

    By the end of the year, investors will likely be contending with the first Federal Reserve (Fed) rate hike in nearly a decade.

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center