FCFF FAQ
What is FCFF?
FCFF stands for Free Cash Flow to Firm. It measures the cash generated by a business that is available to all capital providers after operating costs, taxes, working capital needs, and investment outflows are considered.
How is FCFF used in valuation?
FCFF is commonly used in discounted cash flow (DCF) analysis. Because FCFF is a pre-financing cash flow, it is typically discounted using WACC to estimate enterprise value.
What is the formula used in this calculator?
This calculator uses FCFF = OCF - E - T - ΔNWC - ΔI, where operating cash flow is adjusted for expenses, taxes, changes in net working capital, and changes in investment.
What does a negative FCFF mean?
A negative FCFF means the business is using more cash than it is generating after reinvestment and operating needs. That can be normal for a growing company, but it should be interpreted in context.
What is the difference between FCFF and FCFE?
FCFF measures cash available to all providers of capital, while FCFE measures cash available only to equity holders after debt-related cash flows are considered.
