Which of the Following Statements Is CORRECT

question 118

Multiple Choice

Which of the following statements is CORRECT?

• A)Free cash flow (FCF) is, essentially, the cash flow that is available for interest and dividends after the company has made the investments in current and fixed assets that are necessary to sustain ongoing operations.
• B)After-tax operating income is calculated as EBIT(1 − T) + Depreciation.
• C)Two firms with identical sales and operating costs but with different amounts of debt and tax rates will have different operating incomes by definition.
• D)If a firm is reporting its income in accordance with generally accepted accounting principles, then its net income as reported on the income statement should be equal to its free cash flow.
• E)Retained earnings as reported on the balance sheet represent cash and, therefore, are available to distribute to stockholders as dividends or any other required cash payments to creditors and suppliers.

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Definitions:

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, remaining constant over a period.

Target Profit

The desired financial gain a company aims to achieve within a specific period through its operations and sales.

Fixed Expense

Charges that stay unchanged with shifts in the amount of products made or the number of sales.

Unit Sales

The measure of the quantity of units of a product sold by a company, often used as an indicator of demand and financial health.