Unlevered Free Cash Flow

Unlevered free cash flow (UFCF) is the cash a business generates from operations before any debt payments, after covering taxes, working capital, and capital expenditure. It shows what the business produces regardless of how it is financed.

UFCF = EBIT × (1 - Tax Rate) + Depreciation & Amortization - CapEx - Change in Net Working Capital

Interest is deliberately excluded. Two identical businesses, one debt-free and one heavily borrowed, have the same UFCF, which is exactly why valuation work uses it: it compares the engine, not the financing.

Levered free cash flow is what remains after interest and scheduled debt repayments; it belongs to the owners. Unlevered free cash flow is measured before those payments; it belongs to all capital providers, lenders and owners together. In the example above, if the business paid $60,000 of interest and principal, its levered free cash flow would be $190,000 while UFCF stays $250,000.

Unlevered free cash flow is the cash the business produces before debt payments, showing the underlying generation capacity regardless of how it's financed. In day-to-day cash management the levered view rules, because interest and principal really do leave the bank account. Cash Flow Frog forecasts at that bank-account level, every debt payment included, while UFCF answers the investor's question of what the engine underneath is worth.