Enterprise Value & FCF

Definition of Enterprise Value (EV)
Enterprise value is the combined market value of all the financial stakeholders in a company, that provide the capital the company puts at work in order to generate a remuneration (FCF) on it. In our methodology, we include not only Equity and Debt, but also Minorities and Other Liabilities, minus Cash and Other Assets.

Definition of Free Cash Flow (FCF)
Free Cash Flow is the cash generated by putting the company’s net assets (the complement of EV) at work.
It is the net of cash revenues minus cash expenses, whereas non-cash items are not taken into account, and taking into account the cash outlays needed to keep the company a going concern. It is the remuneration on the enterprise value. It can be used to pay interests, pay back debts, pay dividends, buy back shares, ... . If held within the company, it can also be used to pay for new growth initiatives, like new projects or acquisitions, ... .
In our methodology, the most important components are EBITDA, minus Taxes, Capital Expenditures and the Change in Working Capital Requirement.