We are back with an educational short that demystifies the concept of Free Cash Flow (FCF), a pivotal financial metric for investors, analysts, and finance professionals. This video is dedicated to unraveling the nuances of Free Cash Flow to the Firm (FCFF) and Free Cash Flow to Equity (FCFE), offering a clear and comprehensive understanding of how these figures play a crucial role in evaluating a company's financial health and investment attractiveness. Free Cash Flow represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. It’s an indicator of a company's ability to generate cash, which can be used to pay dividends, repay shareholders, or invest in growth opportunities. The distinction between FCFF and FCFE is paramount for financial analysis: Free Cash Flow to the Firm (FCFF): FCFF is the cash flow available to all funding providers, both debt and equity holders. It is calculated before any payments to lenders or shareholders and represents the net amount of cash that is available for all providers of capital after the company has paid for all operating expenses, taxes, and investments in working capital and fixed capital. Free Cash Flow to Equity (FCFE): FCFE is the cash flow available to the company’s equity shareholders after all expenses, debts, and reinvestments. It is an indicator of how much cash could potentially be paid out to shareholders and is calculated after accounting for debts and reinvestment needs. Understanding the difference between FCFF and FCFE is essential for conducting a thorough valuation of a company and making informed investment decisions. This video delves into the formulas for calculating each type of free cash flow, their significance, and how they can be used in financial analysis to assess a company's performance and potential for growth. Subscribing to our channel for regular videos on FRM, CFA, and Financial Modeling. Follow us on: LinkedIn: https://www.linkedin.com/company/quintedge/ Facebook: https://www.facebook.com/quint.edge Instagram: https://www.instagram.com/quint.edge