Free cash flow is defined as:
A) money in a company's bank account.
B) government funds given to a company for meeting Environmental Protection Agency (EPA) regulations.
C) additional funds donated by stockholders.
D) cash in excess of that required to fund investments in the company's industry and to meet any debt commitments.
E) cash borrowed by the company that requires no interest payments.

Question

Quizplus · Accepted Answer

Free cash flow refers to the cash remaining after a company has made investments in its industry and paid any debts or obligations. This cash is available to be used for various purposes, such as paying dividends to shareholders, expanding the business, or acquiring other companies. Therefore, choice D is the best answer as it describes cash in excess of what is needed for company investments and debt obligations. The other choices, A, B, C, and E, are incorrect as they do not accurately describe free cash flow.

Free Cash Flow Is Defined As