DCF (Discretionary Cash Flow)
Corporate Credit Analysis glossary · Financial Statement Analysis & Cash Flow Dynamics
Definition
FOCF less dividends and minority distributions; cash available for debt reduction after required investments and shareholder payments. A higher DCF/Debt ratio implies stronger deleveraging capacity.
DCF (Discretionary Cash Flow) in plain English
Discretionary cash flow is the money truly left over after a company has done everything it's obligated to do — run the business, invest to keep going, and pay shareholders their dividends. Whatever remains is "free to choose" cash, and the most valuable choice is usually paying down debt. When you compare it to how much debt the company carries (DCF/Debt), a bigger ratio means it can shrink its debt pile faster. Think of your paycheck after rent, groceries, and your family allowance are covered: that leftover is what you can actually use to knock out a loan.
Also called: Discretionary Cash Flow
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