Valuation

DCF (Discounted Cash Flow)

A valuation method that estimates the present value of a business based on its projected future cash flows.

What does DCF mean?

DCF analysis projects a company's free cash flows into the future (typically 5-10 years), then discounts them back to present value using the weighted average cost of capital (WACC). A terminal value captures the business value beyond the projection period. DCF is considered the most theoretically sound valuation method because it focuses on cash generation rather than accounting profits. It is widely used in M&A, investment banking, and startup fundraising.