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INVESTING • Equity Valuation
Understanding Free Cash Flow (FCF) vs. EBITDA for Equity Valuation
Why operating cash generation provides a far more reliable indicator of corporate solvency and debt repayment capability than accounting EBITDA.
By David Sterling, CFA • Reviewed by Harold Zimmerman, CPA • Updated Yesterday
Key Takeaways
- EBITDA ignores capital expenditures (CapEx) and working capital cash requirements.
- Free Cash Flow represents the actual cash left for debt reduction, dividends, or share buybacks.
- DCF models built on Unlevered Free Cash Flow provide true enterprise valuation.
Zero-Risk Trading
Put Theory to Practice
Trade simulated equities and options using $100,000 in virtual cash with real-time market data.
Open Paper Trading Account →Foundational Investing & Valuation Guides
Portfolio Theory
How to Build a Risk-Parity Portfolio in Elevated Volatility Regimes
Equalizing risk contribution across equities, duration, and inflation hedges.
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Derivatives
Options Greeks Explained: Delta, Gamma, Theta and Vega in Practice
Mathematical sensitivities and risk hedges every derivatives trader must measure.
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Valuation
Discounted Cash Flow (DCF): The Complete Valuation Walkthrough
Calculating WACC, forecasting free cash flows, and computing terminal value.
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Fixed Income
Treasury Yield Curve Inversion: Historical Recession Track Record
What 2-year vs. 10-year spread inversions mean for equity allocation strategies.
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