- If a firm continues to earn negative free cash flow to the firm (FCFF), it means its cash from operations is insufficient to meet investing needs and it will require external financing like debt or equity issuance. - The FCFF and free cash flow to equity (FCFE) models will only lead to the same firm value if the firm has no debt. With debt, the models are unlikely to yield the same value. - Using market values for debt and equity avoids problems of circularity that can arise when using book values in the weighted average cost of capital (WACC) calculation under the FCFF approach. Differences between the models can also arise if the firm's debt-to-equity ratio is changing