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1.5.8 EV to Free Cash

MAY 2024

This ratio is the enterprise value (EV) of a company divided by its free cash flow (FCF), which refers to cash flow available to all capital providers (both equity and debt providers) of the company. A high EV/FCF may indicate that a company is overvalued, and vice versa.

where:

 is the equity value of company  at time 
 is the total debt of the company, including both long-term and short-term debt on the balance sheet
 is the cash flow available for debt service (free cash flow) at time
 is the senior debt service at time  
 is the total cash in the bank at time 
 is the total cash in the bank at time  

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