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. Discounted Cash Flow - DCF

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

    The process of determining the current worth of an asset or company. ...
  5. Free Cash Flow Yield

    An overall return evaluation ratio of a stock, which standardizes ...
  6. Capital Expenditure - CAPEX

    Funds used by a company to acquire or upgrade physical assets ...
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. Fundamental Analysis

    What is considered a good PEG (price to earnings growth) ratio?

    Learn about the price/earnings to growth (PEG) ratio and understand what investors and market analysts consider a good ratio for this valuation measure.
  6. Fundamental Analysis

    Should companies break out accounts receivables into subledgers?

    Find out why every company that sells on credit should break down its accounts receivable into individual customer subsidiary ledgers, or subledgers.
  7. Fundamental Analysis

    How do you calculate operating cash flow in Excel?

    Lenders and investors can predict the success of a company by using the spreadsheet application Excel to calculate the free cash flow of companies.
  8. Fundamental Analysis

    Are taxes calculated in operating cash flow?

    Learn how taxes are involved with the calculations for operating cash flow, and find out about the importance of operational cash flow.
  9. Fundamental Analysis

    What metrics can be used to evaluate companies in the forest products sector?

    Understand some of the best financial and equity valuation measurements that can be utilized to evaluate companies in the forest products sector.
  10. Fundamental Analysis

    What's a Prospectus?

    The Security and Exchange Commission (SEC) requires that any company raising money from potential investors through the sale of securities must file a prospectus with the SEC and then provide ...

You May Also Like

Hot Definitions
  1. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  2. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  3. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  4. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  5. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  6. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
Trading Center