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

RELATED TERMS
  1. Amortization

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

    A company's cash flow before interest payments are taken into ...
  3. Capital Expenditure - CAPEX

    Funds used by a company to acquire or upgrade physical assets ...
  4. Valuation

    The process of determining the current worth of an asset or company. ...
  5. Discounted Cash Flow - DCF

    A valuation method used to estimate the attractiveness of an ...
  6. Dividend Discount Model - DDM

    A procedure for valuing the price of a stock by using predicted ...
Related Articles
  1. Discounted Cash Flow Analysis
    Fundamental Analysis

    Discounted Cash Flow Analysis

  2. Free Cash Flow: Free, But Not Always ...
    Markets

    Free Cash Flow: Free, But Not Always ...

  3. Taking Stock Of Discounted Cash Flow
    Fundamental Analysis

    Taking Stock Of Discounted Cash Flow

  4. Advanced Financial Statement Analysis
    Options & Futures

    Advanced Financial Statement Analysis

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center