Free cash flow provides an indication of a company's ability to
A)generate cash to invest in new capital expenditures, but not to pay dividends.
B)generate net income.
C)generate cash to pay dividends, but not to invest in new capital expenditures.
D)generate cash to invest in new capital expenditures and to pay dividends.

Question

Quizplus · Accepted Answer

Free cash flow represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. It indicates the company's ability to invest in new capital expenditures and pay dividends.

Free Cash Flow Provides an Indication of a Company's Ability