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 the above.

Question

Quizplus · Accepted Answer

The cash flow of the firm must be equal to the cash flow to stockholders plus cash flow to debtholders. This is because the cash flow to stockholders includes dividends and share repurchases, while the cash flow to debtholders includes interest payments and principal repayments. Together, these cash flows represent the total cash flow of the firm.

The Cash Flow of the Firm Must Be Equal To