Free Cash Flow to Equity Calculator
Free cash flow to equity (FCFE) is the cash a company can return to its shareholders after paying expenses, taxes, reinvestment, and debt cash flows. It is the key input for equity discounted cash flow valuation. This calculator builds FCFE from net income by adding back depreciation and amortisation, subtracting capital expenditures and any increase in non-cash working capital, and adding net borrowing. Enter each component, using negative values where appropriate (for example, a working-capital decrease or net debt repayment). The result is the period's free cash flow available to equity.
FCFE formula
FCFE = net income + depreciation and amortisation
- capital expenditures
- increase in working capital
+ net borrowing
Net reinvestment = capex + working capital increase - depreciation
Net borrowing equals new debt raised minus debt repaid. A decrease in working capital is entered as a negative increase, which adds cash back to FCFE.
FCFE context
- FCFE is the cash that could be distributed without harming operations.
- It is discounted at the cost of equity in equity DCF valuation.
- Heavy reinvestment or debt repayment can push FCFE below net income.
- New borrowing can raise FCFE above net income in a given period.
- FCFE differs from free cash flow to the firm, which is before debt cash flows.
Free cash flow to equity: frequently asked questions
What is free cash flow to equity?
Free cash flow to equity (FCFE) is the cash available to a company's equity holders after operating expenses, taxes, reinvestment, and debt cash flows. It represents the cash that could be paid out as dividends or share buybacks without harming operations.
How is FCFE calculated?
A common formulation is: FCFE equals net income, minus capital expenditures, plus depreciation and amortisation, minus the increase in non-cash working capital, plus net borrowing (new debt raised minus debt repaid). This calculator uses that build-up.
Why add back depreciation?
Depreciation and amortisation are non-cash expenses already deducted in net income. Adding them back removes their effect, because they do not consume cash. Capital expenditures are then subtracted to capture the actual cash spent on long-term assets.
How does net borrowing affect FCFE?
Net borrowing is new debt raised minus debt repaid. Raising debt brings cash to equity holders, increasing FCFE; repaying debt uses cash, decreasing FCFE. Enter net borrowing as positive if more debt was raised than repaid, negative otherwise.
How is FCFE used in valuation?
FCFE is the basis of equity-focused discounted cash flow valuation. Projected FCFE is discounted at the cost of equity to estimate the value of the company's equity directly, rather than the whole firm.
Official sources
- U.S. Securities and Exchange Commission: Investor.gov.
- U.S. Securities and Exchange Commission: SEC.gov.
Reviewed by the CalculatorHub team, edited by James Graham, 17 June 2026. See our methodology.