What Is Free Cash Flow to Equity (FCFE)? Formula and Example

By Kristi Waterworth – Updated Aug 28, 2025 at 6:39 PM | Fact-checked by Frank Bass

Key Points

FCFE shows a company's money left after paying bills, essential for assessing financial health.
To calculate FCFE: net income + depreciation - capex - working capital + net debt.
Positive FCFE suggests self-funding ability, while negative FCFE indicates likely borrowing.

When choosing a stock to purchase or re-evaluating one, it's vital to understand what's happening with the company's money. Free cash flow to equity (FCFE) can help you understand how effectively your company is using its equity capital, including whether dividends and stock buybacks were likely financed or the company just used its own funds for these transactions.

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Person sitting at a desk and conducting financial analysis. — Image source: Getty Images.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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