Fundamental Glossary / Cash Flow Metrics
Free Cash Flow to Firm (FCFF)
Free cash flow available to all capital providers, before interest.
Formula
EBIT x (1 - tax rate) + depreciation - capex - increase in working capital. Another route: operating cash flow + after-tax interest - capex.
What it means
FCFF belongs to both lenders and shareholders. It is the cash flow discounted at WACC in a firm-level DCF, because WACC already charges for debt.
Using FCFF and then also subtracting interest would double-count the cost of debt.
How to read it
Forecast FCFF from revenue, margins, tax, reinvestment, and working capital. The historical figure is the check that the forecast is not a fantasy.
What to watch
A tax rate applied to EBIT is a simplification when the real cash tax differs. Use cash tax if you know it. And do not discount FCFF at the cost of equity.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.