FCF vs LOI
FCF (Free Cash Flow) and LOI (Letter of Intent) both come up in business conversations and get confused. Here's the plain-English difference, side by side, so you can use each one with confidence.
The key difference: FCF refers to free cash flow, while LOI refers to letter of intent — they describe different things even when they show up in the same sentence.
FCF — Free Cash Flow
Cash generated from operations after capital expenditures. FCF is what a business can actually return to shareholders, pay down debt with, or reinvest — unlike accounting profit, you can't fake it.
LOI — Letter of Intent
A non-binding document outlining the key terms of a proposed deal — typically price, structure, and timeline — before the lawyers draft the real contract. LOIs signal serious intent without legally locking either party in.
When to use FCF
Reach for "FCF" when the conversation is specifically about free cash flow. Cash generated from operations after capital expenditures. FCF is what a business can actually return to shareholders, pay down debt with, or reinvest — unlike accounting profit, you can't fake it.
When to use LOI
Reach for "LOI" when the conversation is specifically about letter of intent. A non-binding document outlining the key terms of a proposed deal — typically price, structure, and timeline — before the lawyers draft the real contract. LOIs signal serious intent without legally locking either party in.
FAQs
What is the difference between FCF and LOI?
FCF stands for Free Cash Flow — Cash generated from operations after capital expenditures. FCF is what a business can actually return to shareholders, pay down debt with, or reinvest — unlike accounting profit, you can't fake it. LOI stands for Letter of Intent — A non-binding document outlining the key terms of a proposed deal — typically price, structure, and timeline — before the lawyers draft the real contract. LOIs signal serious intent without legally locking either party in.
Are FCF and LOI the same thing?
No. They're often used in the same conversation because they're related, but they describe different concepts. FCF = Free Cash Flow. LOI = Letter of Intent.
When should I use FCF vs LOI?
Use FCF when you're specifically referring to free cash flow. Use LOI when the topic is letter of intent.