Free cash flow is cash from operations, less cash for

Question

Quizplus · Accepted Answer

Free cash flow is the cash from operations that remains after accounting for the cash required to maintain the company's productive capacity (i.e. fixed assets) and payments to shareholders in the form of dividends. Therefore, the correct choice is A, which includes both of these factors. Option B includes cash to redeem bonds payable, which is not necessary to calculate free cash flow, and option C only includes fixed assets needed to maintain productivity, without accounting for dividend payments. Option D is a combination of options A and B, which includes more information than is necessary to calculate free cash flow.

Free Cash Flow Is Cash from Operations, Less Cash for