Free Cash Flow (FCF) and Net Income (NI) Differ in the Following

question 1

Multiple Choice

Free cash flow (FCF) and net income (NI) differ in the following ways:
I. net income is the return to shareholders, calculated after interest expense; free cash flow is calculated before interest.
II. net income is calculated after various non-cash expenses, including depreciation; we add back depreciation when we calculate free cash flow.
III. capital expenditures and investments in working capital do not appear in net income calculations; they do reduce free cash flows.
IV. net income is never negative; free cash flows can be negative for rapidly growing firms, even if the firm is profitable, because investments exceed cash flows from operations.

• A) I only
• B) I and II only
• C) I, II and III only
• D) I, II, III and IV

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Definitions:

Exclusive Jurisdiction

A legal term indicating that only one particular court or legal authority has the power to hear and decide a specific type of case.

Concurrent Jurisdiction

A situation where two or more courts have the same authority to preside over a given legal case.

In Rem Jurisdiction

The power of a court over the property or status of an out-of-state defendant when that property or status is within the court’s jurisdiction area.

In Personam Jurisdiction

The power of a court to require a party (usually the defendant) or a witness to come before the court. The court must have personal jurisdiction to enforce its judgments or orders against a party. In personam jurisdiction extends only to the state’s borders in the state court system and across the court’s geographic district in the federal system.