Free Cash Flow to Equity

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Free Cash Flow to Equity

The cash that a company has on hand after all debt service and expenses have been paid and reinvestment has been made. The free cash flow to equity is calculated thusly:

FCFE = Net income + newly borrowed debt - capital expenditures - change in net working capital - debt service.

FCFE is a measure of a company's value and is considered an alternative to the dividend discount model.
References in periodicals archive ?
We then consider broader definitions of cash flows to equity, by fist including stock buybacks in cash flows to equity and by then expanding out analysis to cover potential dividends or free cash flows to equity.
As a consequence, the free cash flows to equity at these firms exceed dividends and large cash balances build up.
2 Discounted cash flow valuation
The results for the ranked current-year cash flows to shareholder specifications indicate that ranked current-year dividends per share (DPS) was more useful than either the ranked current-year dividend payout ratio (DPR) or ranked current-year free cash flows to equity (FCFE).
Predicting relative stock prices: an empirical study
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