The calculation of free cash flow to equity includes all of the following except for

Question

Quizplus · Accepted Answer

Free cash flow to equity (FCFE) is calculated to determine the amount of cash that a company can return to its shareholders after all expenses, reinvestment, and debt payments are accounted for. Operating income is not directly used in the calculation of FCFE. Instead, FCFE is calculated starting with net income, then adding back non-cash expenses, adjusting for changes in working capital, and accounting for capital expenditures and debt financing. Preferred dividends, changes in working capital, gross plant and equipment spending, and principal repayments are all considered in the calculation of FCFE in various ways, making operating income the correct choice as it is not directly included in the FCFE calculation.

The Calculation of Free Cash Flow to Equity Includes All