FCF to firm / FCF to equity / Unlevered FCF / Levered FCF

Hello ! I was wondering the difference between FCF to firm / FCF to equity / Unlevered FCF / Levered FCF .

I know Unlevered FCF = EBITDA - Taxes - Changes in Working Cap - Capex

and Levered FCF is the same but you take out the interests this time.

But what about FCF to Firm and FCF to Equity? How do these two differ?


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Comments (14)

Feb 27, 2017 - 10:20am

Unlevered FCF is really EBIT - taxes + D&A - CAPEX - change in NWC and it's the same thing as FCF to the firm because it includes debt expense. You take out D&A and then add it back because there's a tax shield in the amount of D&A*(1-t) that boosts your FCF. If you just do EBITDA - taxes then you lose that tax shield.

Levered FCF would then be Net Income + D&A - CAPEX - change in NWC. Again, you start at net income because you want that tax shield. Since interest has been taken out, this is FCF to equity since this number removes the debt expense.

Feb 27, 2017 - 1:15pm

Try google bud. Happy to answer questions that you're puzzled on after spending some time yourself. But at least some effort.

FYI to other readers / prospective students: This type of behavior will annoy the shit out of associates and more senior analysts. Questions are welcome, but do the legwork yourself.

Feb 27, 2017 - 6:14pm

Thanks for the feedback.

I was actually very sure about what UFCF is and what LFCF is.

Just uncertain about FCF to Firm and FCF to Equity because certain resources recommend FCF to Firm for your DCF and others UFCF for the same purpose.

Google is really not clear on the subject! :/

Feb 27, 2017 - 7:20pm

Unlevered FCF = FCFF.

FCFF is the "academic" label and unlevered free cash flow is what you would call it in banking. Free Cash Flow to Firm is cash flow available to the whole firm (or enterprise), hence the derived value is the enterprise value.

Likewise, unlevered FCF is the cash flow before any interest expense or cash outflows associated with levering (aka capital structure) - also used to get the enterprise value. These concepts are the same.

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Feb 27, 2017 - 7:25pm

To add on to this. FCFE says we don't care what the enterprise value is (value of the whole business), we're just going to evaluate the projected cash flows to equity holders and thereby only value the equity, which is also equal to enterprise value - net debt.

FCFE is academic and very rarely done in banking. Most valuations will include a DCF, but almost always unlevered free cash flow (FCFF). I can't remember a time I did FCFE.

Feb 27, 2017 - 7:27pm

Unlevered FCF is FCF before paying interest (taking into account the leverage) whereas FCFF is cash total net FCF

"I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant."

Feb 27, 2017 - 7:32pm


These are the same and it is the correct metric to use for a DCF. What you don't want to use is levered FCF/ Free cash cash flow to equity holders. Google them if you're confused about the difference.

This was a better explanation than mine :)

"I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant."

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