Unlevered Free Cash Flow - UFCF

A company's cash flow before interest payments are taken into account. Unlevered free cash flow can be reported in a company's financial statements, and shows how much cash is on hand to pay for operations before other financial obligations are taken into account.

Unlevered Free Cash Flow = EBITDA - CAPEX - Working Capital - Taxes

The smaller the gap between unlevered cash flow and leveraged cash flow, the smaller amount of unobligated cash the company has on hand, and the company is more likely to run into problems if revenue streams dry up.

A company that has a large amount of outstanding debt - one that is highly "leveraged" - is more likely to report unlevered free cash flow because it provides a rosier picture of the company's financial health. The figure shows how assets are performing in a vacuum, because it ignores the payments made for debt incurred to obtain those assets. Investors have to make sure to take into account debt obligations, since highly leveraged companies are at greater risk for bankruptcy.