The Free Cash Flow to Equity (FCFE) Calculator helps assess how much cash a company can return to its equity shareholders after meeting all capital investment needs and debt obligations. It gives a clear picture of the company’s ability to pay dividends or buy back shares without taking on more debt. This metric is widely used in equity valuation models, especially discounted cash flow (DCF) analysis tailored for shareholders.
This calculator falls under the Financial Valuation Tools category.
By using this tool, investors can analyze whether a company generates enough free cash flow to sustain shareholder value, which is crucial for making long-term investment decisions.
formula of FCFE Calculator
FCFE = Net Income
+ Depreciation & Amortization
− Capital Expenditures
− Change in Working Capital
+ Net Borrowing
Where:
- Net Income is the after-tax earnings found on the income statement.
- Depreciation & Amortization are non-cash charges add back because they don’t affect cash flow.
- Capital Expenditures (CapEx) reflect investments in fixed assets like equipment and buildings.
- Change in Working Capital captures the difference in current assets and liabilities, affecting short-term cash use.
- Net Borrowing is the net of any new debt issued minus any debt that has been repaid.
The result represents the cash available to equity holders after all obligations and reinvestments.
Reference Table: Pre-Calculated FCFE Examples
| Net Income | Depreciation & Amortization | CapEx | Change in Working Capital | Net Borrowing | FCFE |
|---|---|---|---|---|---|
| $10,000 | $2,000 | $3,000 | $500 | $1,000 | $9,500 |
| $50,000 | $5,000 | $10,000 | $2,000 | $2,000 | $45,000 |
| $30,000 | $4,000 | $12,000 | $1,500 | $0 | $20,500 |
| $20,000 | $1,000 | $5,000 | $2,000 | $500 | $14,500 |
This table helps users estimate FCFE quickly and compare how different financial inputs affect equity value.
Example of FCFE Calculator
Let’s calculate FCFE for a company with the following data:
- Net Income: $100,000
- Depreciation & Amortization: $15,000
- Capital Expenditures: $40,000
- Change in Working Capital: $5,000
- Net Borrowing: $10,000
FCFE = 100,000 + 15,000 − 40,000 − 5,000 + 10,000
FCFE = 80,000
This means the company has $80,000 in free cash flow available for distribution to its equity shareholders.
Most Common FAQs
FCFE is used in financial analysis to determine how much cash a company can potentially return to shareholders. It’s a core metric in equity valuation models such as the discounted FCFE model.
Not exactly. While dividends are actual cash payments made to shareholders, FCFE measures the potential cash available for such distributions. A company might choose to retain this cash for strategic reasons.
Yes. If capital expenditures, working capital needs, or debt repayments exceed net income and depreciation, FCFE can be negative. This may suggest the company is reinvesting heavily or struggling with cash flow.