Can it be the case that FCFF is negative while FCFE is positive?And reason behind it?

Yes this is possible. If the business is in a capital intensive high growth phase the FCFF can be negative (capex larger than operating cash flow). If the business raises debt to meet these capex requirements then the FCFE could be positive after accounting for debt drawdown.

Note that there are a couple additional things to consider here. Debt providers are unlikely to fund 100% of capex with no contribution from equity so this situation of negative FCFF but positive FCFE would not be sustainable. The most likely situation for this to occur would be if the business raises a term loan to meet current and future capex and draws down the facility in one go creating a large cash surplus in this period.

Whether debt providers would allow equity to recapitalise itself with this surplus is another question and will be unique to the situation

/r/financialmodelling Thread