Free Cash Flow FCF (FCFF / FCFE / uFCF / lFCF)
The cash left over after a business funds the investment needed to keep operating, the cash truly available to investors.
The fork, why two teams get different numbers
FCF has no GAAP definition, and the variants genuinely mean different things.
Free Cash Flow to Firm (unlevered) is pre-financing and pre-interest; Free Cash
Flow to Equity (levered) is after interest and debt flows. Beyond that, teams
disagree on: whether to subtract all capex or only "maintenance" capex; whether
to add back stock-based comp (it's non-cash in OCF but a real dilution cost);
and how to treat finance-lease principal payments post-ASC 842. Each choice
moves FCF by material amounts, so "FCF" quoted bare is nearly meaningless.
The trap
FCF is flattered by two easy levers: cutting or deferring capex (shrinks the subtraction but starves the business) and stretching payables at period end (temporarily boosts OCF).
- The full trap, worked on a real export
- Every formula variant, spelled out
- The reconciliation anchor, what to tie it to and when to refuse
Reference: FASB ASC 230 · FASB ASC 842 (Leases) · CFA Institute FCFF/FCFE framework