Valuation Terms
Discounted Cash Flow
A valuation method that estimates today’s value based on expected future cash flows.
Also called: DCF, DCF model
What it means
A discounted cash flow, or DCF, model estimates what a business may be worth by projecting future cash flows and discounting them back to the present using a required rate of return. Small changes in assumptions can change the result a lot.
Why it matters
It is a foundational valuation method that teaches users why future growth, risk, and time all affect value.