Asked by Julio Cesar Meirelles on Jun 17, 2024
Verified
Free cash flow is
A) all cash in the bank
B) cash from operations
C) cash from financing less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends
D) cash flow from operations less cash used to purchase fixed assets to maintain productive capacity
Free Cash Flow
The amount of cash a company generates after accounting for capital expenditures required to maintain or expand its asset base.
Productive Capacity
The maximum output a system can produce over a set period under normal conditions.
- Compute free cash flow.
Verified Answer
JM
Jogging MusicJun 18, 2024
Final Answer :
D
Explanation :
Free cash flow is the cash generated from operations after deducting the cash used for capital expenditures to maintain productive capacity. Choice A is incorrect because free cash flow is not equal to all cash in the bank. Choice B is incorrect because it does not take into account capital expenditures. Choice C is incorrect because it includes cash used for dividends, which is not included in the calculation of free cash flow. Therefore, the correct answer is D.
Learning Objectives
- Compute free cash flow.