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. Reinvestment

    Using dividends, interest and capital gains earned in an investment ...
  5. Free Cash Flow Yield

    An overall return evaluation ratio of a stock, which standardizes ...
  6. Valuation

    The process of determining the current worth of an asset or company. ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
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. Charts & Patterns

    Why These Could Be 2015's 10 Best Biotech Stocks

    A quick look at a 10 biotech companies that are poised to deliver for shareholders in 2015.
  6. Economics

    What is M1?

    M1 is a measurement of money supply that includes all hard currency, plus demand deposits such as checking accounts.
  7. Charts & Patterns

    Why These Could Be 2015's 10-Best Media Stocks

    A list of top-tier and speculative media stocks for 2015.
  8. Stock Analysis

    Is This Dividend Stock A Value Or Value Trap?

    We can say that Fifth Street Finance has had a rough year, but there's a huge difference between an undervalued stock and a stock that's cheap for a reason
  9. Charts & Patterns

    Why These Could Be 2015's 10-Best Pharma Stocks

    The pharmaceutical stocks covered here have significant potential going forward. Here's why.
  10. Charts & Patterns

    Why These Are 2015's 10-Best Financial Stocks

    If you're going to invest in the financial stocks, these names need to be on your radar.

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center