A question I stumbled across from the CFAI asked to estimte the “free cash flow” for a given year. I calculated: FCF = CFO - Capex The solution called for calculating the FCFF, which included adding back (int. expense)(1-t), which you wouldn’t do to find the “free cash flow”. On the same, do we assume “free cash flow” refers to FCFF?

I always assumed FCF is FCFF. Is there a reason not to think that?

Edit: A tiny little assumption on the following page says “FCF is similar to free cash flow to the firm”. I guess assume “free cash flow” is FCFF for the test.

I believe the difference is when you are looking at the Fixed income ratios… where they take CFO - Cap ex…

I personally hate that I miss some questions based on that kind of stuff. I share your frustration :slight_smile:

understand the context of the quesiton… i believe bad5shah is right, if it is fixed income analysis or credit analysis. FCF = CFO - Capex is for prospective bondholders analyzing the companys credit worthiness Interest(1-t) is cash available to current bondholders so it is should be taken out of the equation.

Good point!