FCFF & FCFE, Free Cash Flow to the Firm and to Equity

Calculates free cash flow to the firm and free cash flow to equity from the same operating inputs, showing where the two measures diverge. Inputs are EBIT, the tax rate, depreciation and amortization, capital expenditures, the change in net working capital, interest expense, and net borrowing.

Interactive Tool

EBIT

Tax rate

Depreciation & amortization

Capital expenditures

Increase in net working capital

Interest expense

Net borrowing (new debt − repaid)

FCFF · to all capital

$1.10M

pre-debt

FCFE · to equity

$1.35M

after debt

After-tax EBIT

$1.50M

EBIT × (1 − tax), FCFF start

Net income

$1.35M

(EBIT − interest) × (1 − tax), FCFE start

FCFF is pre-debt cash to all providers; FCFE then adds net borrowing to show what reaches equity. The sign students reverse most: an increase in net working capital is a use of cash, subtracted in both.

Learn the concept

This calculator comes from the free Entrepreneurial Finance course, where the concept is taught with readings, worked examples, and practice questions.

Open Entrepreneurial Finance

Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.