The free cash flows to equity of an entrepreneurial firm includes cash flows to:

Question

Quizplus · Accepted Answer

Free cash flows to equity are the cash flows available to the owners, which include the entrepreneur or founders of the firm as well as other equity investors. Creditors are not part of equity financing, and thus are not included in the calculation of free cash flows to equity. Therefore, option B is incorrect. Option A is partially correct, as venture investors are included in free cash flows to equity as they are equity investors. Option C is also correct as the entrepreneur is an equity investor in the firm. Hence options A and C together represent the correct answer as mentioned in option E. Option D is incorrect as it includes creditors, who are not part of equity financing.

The Free Cash Flows to Equity of an Entrepreneurial Firm