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.

Question

Savannah Huerta

English

22 May, 03:48

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.

+5

Answers (1)

Know the Answer?

Raphael Adkins · Answer 1

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

Explanation:

Free cash flow as the name suggests refers to those cash flows which are arrived at after deducting all operating expenses as well as capital expenses, which are free i. e available to owners and investors for distribution.

Such cash flows are free for dividend distribution which means they are not restricted by any sort of due expense or liability payable.

Capital expenditure refers to expenditure on purchase of capital assets i. e long term assets such as machinery. Capital expenditure is deducted from cash flows from operations.

Free cash flows are expressed as;

Free Cash Flows = Operating Cash Flows - Capital Expenditure