Free cash flow to the firm belongs to all capital providers combined — FCFE narrows that down to what’s actually left over for equity holders once debt-related cash movements are factored in.
How it works
Starting from operating cash flow, subtracting capital expenditures, and adding net new borrowing (debt raised minus debt repaid) gives FCFE — cash available for distribution to equity holders after both reinvestment and debt activity.
What this does not include
This does not include preferred dividends, which some FCFE formulations also subtract since preferred holders have a claim ahead of common equity — this calculator’s simpler version assumes no preferred stock outstanding.
How to use this calculator
- Enter operating cash flow, capital expenditures, and net borrowing.
Frequently asked questions
How is FCFE different from the site’s free-cash-flow (FCFF) calculator?
FCFF is cash flow available to all capital providers (debt and equity combined), before financing activity; FCFE narrows that specifically to equity holders by also accounting for net borrowing.
When would an analyst prefer FCFE over FCFF for valuation?
FCFE is used to value equity directly (discounted at the cost of equity), while FCFF values the entire firm (discounted at WACC) before backing out debt to reach equity value — different starting points for the same ultimate goal.
Can FCFE be higher than FCFF?
Yes — if a company is raising net new debt, that borrowed cash flows to equity holders’ benefit, pushing FCFE above the equivalent FCFF figure for the same operating results.
