The Free Cash flOw Hypothesis States

question 14

Multiple Choice

The free cash flow hypothesis states:

• A)that firms with greater free cash flow will pay more in dividends reducing the risk of financial
• Distress.
• B)that firms with greater free cash flow should issue new equity to force managers to minimize
• Wasting resources and to work harder.
• C)that issuing debt requires interest and principal payments reducing the potential of
• Management to waste resources.
• D)Both A and C.
• E)Both B and C.

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Definitions:

Calculated Field

A field in databases or spreadsheets that gets its value from the formula or expression defined by other fields.

Relational Databases

A database design that identifies the relationships between stored data elements.

Top-down Design

A design methodology that breaks down a system into smaller parts in order to understand, manage, and implement a complex system.

Object-oriented Analysis

Object-oriented Analysis is a computer programming methodology that focuses on defining the types of objects that system operations can apply to rather than the logic of the operations themselves.