Which of the Following Statements Is CORRECT

question 50

Multiple Choice

Which of the following statements is CORRECT?

• A) Most rapidly growing companies have positive free cash flows because cash flows from existing operations generally exceed fixed asset purchases and changes to net working capital.
• B) Changes in working capital have no effect on free cash flow.
• C) Free cash flow (FCF) is defined as follows:
• FCF = EBIT(1 - T)
• + Depreciation
• - Capital expenditures required to sustain operations
• - Required changes in net working capital.
• D) Free cash flow (FCF) is defined as follows:
• FCF = EBIT(1 - T) + Capital expenditures.
• E) Managers should be less concerned with free cash flow than with accounting net income. Accounting net income is the "bottom line" and represents how much the firm can distribute to all its investors both creditors and stockholders.

---

Definitions:

Environmental Turbulence

The rate and magnitude of change that an organization faces from external sources.

Degree of Richness

The extent to which a medium allows for immediate feedback, conveys multiple cues, and supports the use of natural language.

Degree of Interdependence

The extent to which individuals, groups, or systems rely on each other to function effectively.

Operations Technology

The hardware and software solutions used to optimize and automate business operations.