Leveraged Buyout · LBO Modeling
Unlevered Free Cash Flow
What does a free cash flow calculation represent when interest expense and mandatory debt amortization are left out?
Interview question
- Difficulty
- Easy
- Topic
- Leveraged Buyout
- Subtopic
- LBO Modeling
What this question trains
This problem tests whether you can distinguish levered and unlevered cash flow in an LBO context. Interviewers use questions like this to check that you understand how financing decisions affect cash flow attribution, how enterprise value relates to company-wide cash generation, and why investors often analyze cash flow before debt service when valuing the business. It also reinforces the logic behind tying unlevered cash flow to enterprise value, since that measure reflects the operating business rather than the capital structure.