DCF — Discounted Cash Flow
Definition: A valuation method that estimates the present value of a business by forecasting its future cash flows and discounting them back to today.
Example
PE firms and equity analysts build DCF models to justify acquisition prices. Garbage assumptions in, garbage valuation out.
When you'll hear it
DCF shows up most often in board meetings, quarterly business reviews, and strategy off-sites. When someone uses it, they're usually referring to discounted cash flow — and they expect the room to already know what that means.
FAQs
What does DCF stand for?
DCF stands for Discounted Cash Flow.
What does DCF mean in business and finance?
A valuation method that estimates the present value of a business by forecasting its future cash flows and discounting them back to today.
Where will I hear DCF used at work?
DCF comes up most often in board meetings, quarterly business reviews, and strategy off-sites. It's used as shorthand for discounted cash flow, so people assume you already know the term.