Free Cash Flow to Equity - FCFE

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

Notes:

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.

See also: Amortization, Capital Expenditure, Dividend Discount Model, Depreciation, Free Cash Flow, Free Cash Flow for the Firm, Reinvestment, Valuation