Unlevered Free Cash Flow - UFCF

Loading the player...

What is an 'Unlevered Free Cash Flow - UFCF'

Unlevered free cash flow (UFCF) is a company's cash flow before interest payments are taken into account. Unlevered free cash flow can be reported in a company's financial statements, and shows how much cash is on hand to pay for operations before other financial obligations are taken into account.

Unlevered Free Cash Flow = EBITDA - CAPEX - Working Capital - Taxes

The smaller the gap between unlevered cash flow and leveraged cash flow, the smaller amount of unobligated cash the company has on hand, and the company is more likely to run into problems if revenue streams dry up.

BREAKING DOWN 'Unlevered Free Cash Flow - UFCF'

A company that has a large amount of outstanding debt - one that is highly "leveraged" - is more likely to report unlevered free cash flow because it provides a rosier picture of the company's financial health. The figure shows how assets are performing in a vacuum, because it ignores the payments made for debt incurred to obtain those assets. Investors have to make sure to take into account debt obligations, since highly leveraged companies are at greater risk for bankruptcy.

RELATED TERMS
  1. Unlevered Cost Of Capital

    An evaluation that uses either a hypothetical or actual debt-free ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company ...
  4. Levered Free Cash Flow

    The free cash flow that remains after a company has paid its ...
  5. Free Cash Flow To Sales

    A ratio that illustrates the percentage of free cash flow to ...
  6. Price to Free Cash Flow

    A valuation metric that compares a company's market price to ...
Related Articles
  1. Investing

    Understanding Levered And Unlevered Free Cash Flow

    Levered cash flow is the money a business has after meeting its financial obligations. Unlevered free cash flow is the money a business has before paying its financial obligations.
  2. Investing

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. Investing

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  8. 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).
  9. Investing

    Cash Flow On Steroids: Why Companies Cheat

    Pressure to be the best can sometimes push corporations to cheat. Learn how they do it and how to spot it.
  10. Managing Wealth

    Cash Flow Is King: How to Keep it Running

    Why is cash flow so important, and what steps can a business take to improve it?
RELATED FAQS
  1. What does a high unlevered free cash flow indicate about a business?

    Learn the difference between levered free cash flow and unlevered free cash flow. Understand what a high unlevered free cash ... Read Answer >>
  2. Why is unlevered free cash flow important when reviewing a company's finances?

    Understand why unlevered free cash flow is important when reviewing a company's finances. Learn the importance of comparing ... Read Answer >>
  3. What are some tactics businesses can use to increase unlevered free cash flow?

    Learn about ways firms increase their unlevered free cash flow through inventory management, capital expenditures, increased ... Read Answer >>
  4. What's the difference between levered and unlevered free cash flow?

    The difference between levered and unlevered free cash flow can determine if a business has the means or financial ability ... Read Answer >>
  5. How should investors interpret unlevered beta?

    Learn what unlevered beta is, how it is calculated, and how investors can interpret the unlevered betas of companies within ... Read Answer >>
  6. How does unlevered beta help in risk management?

    Find out how unlevered beta can be used in risk identification and management, specifically as it relates to the CAPM valuation ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center