Unlevered & Levered FCF
Unlevered Free Cash Flow shows the company’s cash generating ability before considering financing and is used for Enterprise Value calculations.
Levered Free Cash Flow shows cash remaining for equity holders after fulfilling debt obligations and is used for Equity Value calculations.
Unlevered FCF Formula: EBIAT + D&A - Change NWC - CapEx
Levered FCF Formula: Net Income + D&A - Change NWC - CapEx + Net Borrowings
In the room
The distinction maps directly onto the enterprise-versus-equity value split, which is why interviewers pair the questions. Unlevered is before debt service and gets you enterprise value; levered is after and gets you equity value.