The cash flow of the firm is defined as the cash flow of the assets. This cash flow must be equal to:
A) cash flow to equity minus cash flow to debtholders.
B) cash flow to debtholders minus cash flow to equity.
C) cash flow from changes in working capital plus cash flow to equity.
D) cash flow to equity plus cash flow to debtholders.

Question

Quizplus · Accepted Answer

The cash flow of the firm, or the cash flow of the assets, is the total cash that is generated by the firm's operations. It must be equal to the sum of the cash flow to equity (owners/shareholders) and the cash flow to debtholders (creditors/lenders), as both are claimants on the firm's cash flows.

The Cash Flow of the Firm Is Defined as the Cash