The process that involves reducing a company’s capital through a retirement of debt or equity. To that end, the free cash flow (FCF) is typically used (i.e., the difference between a company’s cash flow and its capital expenditures (CAPEX). For example, if a company wants to decrease its capital (say it is currently capitalized at $100 million) by 20% for whatever reason then it may either repurchase an amount of its shares from the secondary market equal to $20 million or retire an equivalent amount of its debt. It may also rely on both repurchasing its stock and retiring its debt (e.g. $10 million in stock repurchase and $10 million in debt repayment).