Which of these statements related to free cash flow is correct?
A) Free cash flow must be fully distributed to the firm's debtors and shareholders.
B) Free cash flow must be positive for a firm to acquire new fixed assets.
C) All, or part, of free cash flow can be used to increase a firm's cash reserves.
D) When capital expenditures are positive, free cash flow will exceed the cash flow from operations.

Question

Quizplus · Accepted Answer

Free cash flow can be used for various purposes, including increasing a firm's cash reserves. It does not have to be fully distributed to debtors and shareholders, nor does it need to be positive for a firm to acquire new fixed assets. While capital expenditures can impact free cash flow, it is not always the case that free cash flow will exceed cash flow from operations when capital expenditures are positive.

Which of These Statements Related to Free Cash Flow Is