Free Cash Flow To Equity - FCFE

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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.

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  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 >>
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