Definition Free Cash Flow vs FCFF and FCFE

CFA Level II Equities
#1

Hi all,

I am a little confused by the definition of Free Cash Flow. To me the concepts of Free Cash Flow to Equity and Firm are relatively clear, but I am not sure if there is a separate definition of Free Cash Flow. Most of the time the term seems to refer to either FCFF / FCFE where the content applies to both of them.

But for instance in the M&A chapter it seems to me that there is a separate term for FCF (where I can see no difference zu FCFF?). Is that so and if yes how is it defined and what is distinguishing it then from FCFF?

Best,

Mercution

#2

I saw a test somewhere where it explained in the footnote of the item set that by free cash flow they think of FCFF, and I was puzzled until I discowered this footnote.

But I agree it should be explicitely defined.

#3

There are many definitions for free cash flow.

The exam will not use that term (unqualified) without telling you which definition they mean.