The cash flow of the firm must be equal to:
A) cash flow to stockholders minus cash flow to debtholders.
B) cash flow to debtholders minus cash flow to stockholders.
C) cash flow to governments plus cash flow to stockholders.
D) cash flow to stockholders plus cash flow to debtholders.
E) None of these.

Question

Quizplus · Accepted Answer

The cash flow of the firm is the sum of cash flow to stockholders and cash flow to debtholders, as they are the two primary sources of funding for a firm. Therefore, the correct choice is D, which adds up the cash flows to both stockholders and debtholders.

The Cash Flow of the Firm Must Be Equal To