Free cash flow is calculated as
A)profit minus net capital expenditures minus dividends paid.
B)profit minus dividends paid.
C)net cash provided (used) by operating activities minus net capital expenditures minus dividends paid.
D)net cash provided (used) by investing activities minus net capital expenditures minus dividends paid.

Question

Quizplus · Accepted Answer

Free cash flow is the cash generated by a company after accounting for capital expenditures necessary to maintain or expand its asset base. Therefore, option C is the correct choice as it takes into account the net cash provided by operating activities, subtracts the net capital expenditures and dividends paid to arrive at the free cash flow. Options A and B are incorrect as they do not subtract net capital expenditures, which are necessary for the company to grow and maintain its operations. Option D is incorrect as it subtracts net cash provided (used) by investing activities, which may not always be directly related to free cash flow.

Free Cash Flow Is Calculated as