What is 'Free Cash Flow To Equity  FCFE'
Free cash flow to equity (FCFE) is a measure of how much cash can be paid to the equity shareholders of a company after all expenses, reinvestment and debt are paid. FCFE is a measure of equity capital usage. It is calculated as FCFE = Net Income  Net Capital Expenditure  Change in Net Working Capital + New Debt  Debt Repayment.
BREAKING DOWN 'Free Cash Flow To Equity  FCFE'
FCFE is often used by analysts in an attempt to determine the value of a company. This method of valuation gained popularity as an alternative to the dividend discount model, especially if a company does not pay a dividend. Although free cash flow to equity may calculate the amount available to shareholders, it does not necessarily equate to the amount paid out to shareholders.
Calculation and Calculation Inputs
Specifically, free cash flow to equity is composed of net income, capital expenditures, working capital and debt. Net income is located on the company income statement. Capital expenditures can be found within the cash flows from investing section on the cash flow statement. Working capital is also found on the cash flow statement; however, it is in the cash flows from operations section. In general, working capital represents the difference between the company’s most current assets and liabilities. These are shortterm capital requirements related to immediate operations. Net borrowings can also be found on the cash flow statement in the cash flows from financing section. It is important to remember that interest expense is already included in net income so you do not need to add back interest expense.
How to Interpret
Analysts also use FCFE to determine if dividend payments and stock repurchases are paid for with free cash flow to equity or some other form of financing. Investors want to see a dividend payment and share repurchase that is fully paid by FCFE. If FCFE is more than the dividend payment and the cost to buy back shares, the company is funding with either debt or existing capital. Existing capital includes retained earnings made in previous periods. This is not what investors want to see in a current or prospective investment, even if interest rates are low. Some analysts argue that borrowing to pay for share repurchases when shares are trading at a discount and rates are historically low is a good investment. However, this is only the case if the company's share price goes up in the future.

Capital Expenditure (CAPEX)
Capital expenditure, or CapEx, are funds used by a company to ... 
Cash Flow
The net amount of cash and cashequivalents moving into and out ... 
Cash Flow From Financing Activities
A category in the cash flow statement that accounts for external ... 
Cash Flow From Investing Activities
An item on the cash flow statement that reports the aggregate ... 
Price to Free Cash Flow
A valuation metric that compares a company's market price to ... 
Levered Free Cash Flow
The free cash flow that remains after a company has paid its ...

Investing
Analyze Cash Flow The Easy Way
Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors. 
Trading
Free Cash Flow Yield: A Fundamental Indicator
Free cash flow can measure a business’s performance as if you’re looking at its net income line. 
Markets
4 Ratios to Evaluate Dividend Stocks
Discover details about fundamental analysis ratios that could help to evaluate dividend paying stocks, and learn how to calculate these ratios. 
Investing
Analyze Cash Flow The Easy Way
Cash flow statements reveal how a company spends its money and where that money comes from. 
Investing
Fundamental Case Study: Is Amazon's Cash Flow Actually Solid? (AMZN)
Review Amazon's cash flow situation, including its free cash flow yield, operating cash flow from organic growth and cash flow from debt financing. 
Investing
Cash Flow Statement and Financial Health
A cash flow statement records the amounts of cash and cash equivalents entering and leaving a company. 
Investing
Picking Retirement Stocks: Dividends vs. Free Cash Flow
Instead of focusing on dividend payments, a better metric for choosing stocks for your retirement portfolio could be a company’s free cash flow (FCF). 
Investing
Cash Flow From Investing
Cash flow analysis is a critical process for both companies and investors. Find out what you need to know about it. 
Investing
Calculating Net Cash
A company’s net cash is its total cash remaining after it subtracts all liabilities. 
Investing
Operating Cash Flow: Better Than Net Income?
Differences between accrual accounting and cash flows show why net income is easier to manipulate.

How can you calculate free cash flow to equity (FCFE) in Excel?
Learn about Free Cash Flow (FCF) and Free Cash Flow to Equity (FCFE) calculations, as well as how businesses may calculate ... Read Answer >> 
What's the difference between free cash flow to equity and accounting profits?
Understand the difference between Free Cash Flow to Equity (FCFE) and Accounting Profit and their relevance to enterprises, ... Read Answer >> 
What are analysts looking for when they use free cash flow to equity (FCFE)?
Learn how free cash flow to equity helps analysts to advise their corporate and individual clients effectively about buying ... Read Answer >> 
What does free cash flow to equity (FCFE) really tell an analyst?
Discover the calculation analysts prefer using over the dividend discount model to assess the value of a business, and how ... Read Answer >> 
Besides free cash flow to equity (FCFE), what are other metrics for estimating a ...
Learn about metrics used to calculate a company's value, including capital expenditure, revenue expenditure, pricetoearnings ... Read Answer >> 
What's the difference between free cash flow and operating cash flow?
Learn the difference between free cash flow and operating cash flow. Explore how analysts use earnings and cash flow when ... Read Answer >>