If interest and mandatory debt amortization are not deducted, what metric do we calculate?

The metric calculated when interest and mandatory debt amortization are not deducted is Unlevered Free Cash Flow. This type of cash flow represents the cash generated by a company's operations before taking into account its debt obligations. By excluding interest and the effects of debt amortization, unlevered free cash flow provides a clear picture of the company’s operational performance and its ability to generate cash, independent of its capital structure.

This metric is essential for understanding the operational efficacy of the business as it reflects the cash flow available to all capital providers, including equity and debt holders, without the influence of financing decisions. This approach enables investors and analysts to assess the underlying profitability and cash generation capability of a company without the distortions caused by financing arrangements.

It is fundamental for valuations and financial modeling, particularly in scenarios where the goal is to evaluate a company's performance on a purely operational basis. This can be important for prospective investors and in merger and acquisition evaluations, where understanding the core operations is critical.

In contrast, metrics like Levered Free Cash Flow account for interest payments and mandatory debt amortization, which alter the view of cash flow by incorporating the impact of debt financing. Net Income integrates various non-cash items and financing costs, while Operational Cash Flow tends to focus