Free cash flow to the firm (FCFF) is available to all providers of finance; free cash flow to equity (FCFE) is what remains for shareholders after debt service. It is the main input to the discounted cash flow method.
Related terms
Discounted cash flow (DCF)A valuation method based on discounting the free cash flows an asset or company will generate in the future to the present using an appropriate discount rate.Working capitalThe difference between current assets and current liabilities; in practice usually used as net working capital, consisting mainly of trade receivables, inventories and trade payables.Enterprise value and equity valueEnterprise value is the value of a business's operations to all providers of finance; equity value is what remains for shareholders after deducting net debt and similar items.BetaA coefficient measuring the sensitivity of a share's return to changes in the market return, that is, its systematic risk.Break-even pointThe sales volume or amount at which total revenue equals total cost and the business makes neither profit nor loss.Capital asset pricing model (CAPM)A model that calculates the cost of equity from the risk-free rate, beta and the market risk premium.
Last updated: October 31, 2026 · This definition is for general information only.