Question

Free cash flow is________.

a. all cash in the bank
b. cash from operations
c. cash from financing less
d. cash used to purchase fixed assets to maintain productive capacity and cash used for dividends
e. cash flow from operations less cash used to purchase fixed assets to maintain productive capacity

Answer 1

e. Cash flow from operations less cash used to purchase fixed assets to maintain productive capacity

Step-by-step explanation:

Free cash flows are the cash flows that a company generates from its operations. These cash flows are adjusted for capital expenditure and can be identified by the following formula,

Free cash flows = Operating cash flows - Capital expenditures.

Investors look at this metric to see if it is worth investing if a company is able to generate enough cash to cover its capital expenses and still have cash left over for dividends and investment returns.

Hope that helps.