# Free Cash Flow To Equity - FCFE

## What is '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

Next Up

## 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 alternative method of valuation gained popularity as the dividend discount model's usefulness became increasingly questionable.

RELATED TERMS
1. ### Capital Expenditure (CAPEX)

Capital expenditure, or CapEx, are funds used by a company to ...
2. ### Net Debt

A metric that shows a company's overall debt situation by netting ...
3. ### Net Cash

A company's total cash minus total liabilities when discussing ...
4. ### Debt Avalanche

A method that involves making the minimum payment on each debt, ...
5. ### Net Debt To EBITDA Ratio

A measurement of leverage, calculated as a company's interest-bearing ...
6. ### Debt Snowball

A method of debt repayment in which debtors pay off their smallest ...
Related Articles
1. Professionals

### Free Cash Flow

CFA Level 1 - Cash Flow Computations - Direct Method. Learn the direct method to calculating a cash flow statement. Includes calculations for free cash flow, a useful valuation measurement.
2. Investing Basics

### Calculating Net Cash

A company’s net cash is its total cash remaining after it subtracts all liabilities.
3. Investing Basics

### Will Corporate Debt Drag Your Stock Down?

Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
4. Professionals

### Financial Risk Ratios

CFA Level 1 - Financial Risk Ratios. Learn the ratios behind a company&#39;s financial risk. Provides ratios for determining a company&#39;s use of debt and interest rate coverage.
5. Professionals

### Capital Structure

This is an important concept in valuing a company.
6. Bonds & Fixed Income

### Evaluating A Company's Capital Structure

Learn to use the composition of debt and equity to evaluate balance sheet strength.
7. Professionals

### Bankruptcy Costs And Optimal Capital Structure

We look at how debt and equity work together to form the optimal capital structure.
8. Options & Futures

### Financial Statements: Cash Flow

By David Harper (Contact David)In the previous section of this tutorial, we showed that cash flows through a business in four generic stages. First, cash is raised from investors and/or borrowed ...
9. Fundamental Analysis

### Calculating Return on Net Assets

Return on net assets measures a company’s financial performance.
10. Investing Basics

### 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.
RELATED FAQS
1. ### 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 >>
2. ### 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 >>
3. ### 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 >>

5. ### 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, price-to-earnings ... Read Answer >>
6. ### Why would you look at a company's net debt rather than its gross debt?

Learn the difference between net debt and gross debt, how to calculate debt using a company's financial statements and why ... Read Answer >>
Hot Definitions
1. ### Goodwill

An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
2. ### Return On Invested Capital - ROIC

A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
3. ### Law Of Demand

A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
4. ### Cost Of Debt

The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
5. ### Yield Curve

A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
6. ### Stop-Limit Order

An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...