Which of the following is true for free cash flow?
I.Free cash flow is easier to calculate than operating cash flow.
II.Estimated capital expenditures are subtracted from operating cash flow.
III.Estimated capital expenditures are added to operating cash flow.
IV.A negative free cash flow indicates that the company needs additional financing.
A)I,II,& III
B)I & III
C)III & IV
D)II & IV

Question

Which of the following is true for free cash flow? 
I.Free cash flow is easier to calculate than operating cash flow.
II.Estimated capital expenditures are subtracted from operating cash flow.
III.Estimated capital expenditures are added to operating cash flow.
IV.A negative free cash flow indicates that the company needs additional financing.
A)I,II,& III
B)I & III
C)III & IV
D)II & IV

Quizplus · Accepted Answer

Estimated capital expenditures are subtracted from operating cash flow to calculate free cash flow. A negative free cash flow indicates that the company needs additional financing, which is true for option IV. Option I is false, as calculating free cash flow requires additional steps compared to operating cash flow. Option III is also false, as capital expenditures are subtracted from operating cash flow, not added.

Which of the Following Is True for Free Cash Flow