# Cash Flow Methods

Choose the DCF method before building.

Use FCFF for operating companies where enterprise value and WACC are the right frame. Use FCFE when capital structure, regulated financials, or equity cash flows are central and debt is operating-like. Use dividend discount only when dividends are the primary distributable cash flow.

Financial institutions often need FCFE, residual income, dividend capacity, or excess-capital framing rather than generic FCFF. Private companies need explicit illiquidity, size, customer concentration, and source-quality caveats. Distressed cases need liquidity runway, covenant pressure, and reorganization value limits. Project/asset DCFs need contract tenor, capex, working capital, decommissioning, and tax assumptions.

If the method is uncertain, run a screen-grade case and state the method risk before valuation output.