Can I go from UFCF to LFCF? Help a monkey understand, please

Hi, I have an interview coming up and had a question about UFCF and LFCF.

According to my textbook:

1) FCF = Cash flow to creditors + Cash flow to stockholders

     FCF = Operating cash flow - Net Capital Spending - Changes in net working capital

     where:

     UFCF* = EBIT - Taxes + D&A - CapEx - Changes in NWC

2) Cash flow to creditors = Interest paid - Net new borrowing

3) Cash flow to stockholders = Dividends paid - Net new equity raised

---

I know that LFCF is only available to equity investors. The formula I came across is:

LFCFNet Income + D&A - CAPEX - Changes in NWC

So, my question is:

A) Is the "cash flow to stockholders" in my textbook equivalent to LFCF? Initially, it seemed to me like it was just the portion of the FCFF that was available to stockholders. When I tried using the LFCF formula above on the numbers from my textbook, I got:

          LFCF > Cash flow to stockholders

I am assuming this is because, with the UFCF formula, I am starting with the premise that the FCF I am calculating will be available to everybody (i.e. interest is not subtracted). On the other hand, the LFCF assumes that the FCF I am calculating will exclusively be available to stockholders (i.e. interest is already subtracted by using NI).

Otherwise, the following would be true: LFCF = UFCF - Cash flow to creditors

Could someone explain where I am wrong? I doubt I am making any math errors. I want to understand the difference between UFCF and LFCF conceptually. Why can't I simply take UFCF and subtract the portion available to creditors to get LFCF? Are any of my formulas wrong?

Thank you very much in advance!

Edit: I tried again to calculate LFCF with my textbook numbers. This time, I added net new borrowings (the amount by which long-term debt increased). So, I did this:

     LFCF = Net Income + D&A - CAPEX - Changes in NWC + Net new borrowings

     Thus, LFCF = Cash flow to stockholders = UFCF - Cash flow to creditors

But, I still am not understanding why adding net new borrowings made that difference? Was my original LFCF wrong? Shouldn't I be trying to eliminate debt payments and interest when calculating LFCF? Thank you again, and I apologize for the long post. I hope my questions are not confusing.

8 Comments
 

Just a fellow monkey, I believe the difference UFCF and LFCF is the interest payment and debt repayments. Once you take both of these into account in ur FCF, u will arrive at LFCF. (my own understanding and explaination from one of the interviewers)

 

Could you check out my edit in the post? I added net new borrowings and was able to get it. But, I just am not able to wrap my head around it. Do you think you could provide a formula for LFCF?

 

Hi, the formula you use was what I learnt as well. LFCF basically obtained after you minus the interest as well as mandatory debt repayments from UFCF, leaving only the portion claimed by equity investors

 

When you say you’re adding net new borrowings, are you adding the balance of your new borrowings? If so, that’s not right. If the new borrowings are incurring any kind of interest then subtract that, not the current balance.

 

When you say you’re adding net new borrowings, are you adding the balance of your new borrowings? If so, that’s not right. If the new borrowings are incurring any kind of interest then subtract that, not the current balance.

 

When you say you’re adding net new borrowings, are you adding the balance of your new borrowings? If so, that’s not right. If the new borrowings are incurring any kind of interest then subtract that, not the current balance.

 

When you say you’re adding net new borrowings, are you adding the balance of your new borrowings? If so, that’s not right. If the new borrowings are incurring any kind of interest then subtract that, not the current balance.

 

Et natus beatae exercitationem ex. Omnis provident et voluptatem sed voluptatem tenetur rerum. Placeat consequatur esse consequuntur nihil et ratione consequatur.

Assumenda est officia vero odit odit modi. Et necessitatibus voluptatem praesentium tempora doloremque temporibus consectetur. Rem accusantium qui corrupti voluptates dolorem optio ex.

Autem necessitatibus officiis qui. Et fugit tempore mollitia neque. Et sed quia omnis possimus id similique. Nam accusantium eum id amet mollitia pariatur et.

Career Advancement Opportunities

August 2026 Investment Banking

  • Evercore 01 99.4%
  • Moelis & Company 01 98.9%
  • JPMorgan 01 98.3%
  • Morgan Stanley 08 97.8%
  • Goldman Sachs 02 97.2%

Overall Employee Satisfaction

August 2026 Investment Banking

  • Moelis & Company No 99.4%
  • Evercore No 98.9%
  • Morgan Stanley 01 98.3%
  • Banco Santander 02 97.8%
  • BMO Capital Markets 12 97.2%

Professional Growth Opportunities

August 2026 Investment Banking

  • Evercore 01 99.4%
  • Moelis & Company 01 98.9%
  • Morgan Stanley 06 98.3%
  • Goldman Sachs 01 97.8%
  • JPMorgan 01 97.2%

Total Avg Compensation

August 2026 Investment Banking

  • Vice President (16) $429
  • Associates (48) $259
  • 3rd+ Year Analyst (8) $210
  • 2nd Year Analyst (25) $178
  • Intern/Summer Associate (14) $159
  • 1st Year Analyst (83) $151
  • Intern/Summer Analyst (75) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
BankonBanking's picture
BankonBanking
99.0
3
kanon's picture
kanon
99.0
4
Secyh62's picture
Secyh62
99.0
5
CompBanker's picture
CompBanker
98.9
6
GameTheory's picture
GameTheory
98.9
7
dosk17's picture
dosk17
98.9
8
Betsy Massar's picture
Betsy Massar
98.9
9
DrApeman's picture
DrApeman
98.9
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”