Invest
2 Variations of Free Cash Flow
By InvestingNook  •  June 1, 2015
Cash flow analysis is an important tool that every investor should have in their toolbox. The most common and a relatively straight forward cash flow metric is the free cash flow yield which we have covered in an earlier post. Today, we will go deeper and distinguish between the different forms of free cash flow, namely free cash flow to firm (FCFF) and free cash flow to equity (FCFE).

Free cash flow to firm

FCFF represents the amount of cash flow that is available for distribution among all security holders. Security holders include debt, preferred stock holders and common stock holders. In other words, it is the cash flow that is available to the entire firm (which comprises of all the different providers of capital), hence the name; free cash flow to firm. The calculation of FCFF is one which more of us are familiar with:

Free cash flow to ...

...
Read the full article
By InvestingNook
As Co-Founder and Fund Manager of Heritage Global Capital Fund, we started InvestingNook as a website dedicated to sharing the knowledge of value investing – allowing our readers achieve an edge over the markets with the knowledge of value investing.
LEAVE A COMMENT
LEAVE A COMMENT

Your email address will not be published.

*

Your Email Address will not be published
*

Read More Articles
More from thefinance