The Free Cash Flow Hypothesis States

question 34

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) that issuing equity reduces the potential of management to waste resources.

Calculate expected values and understand the concept of expected gain or loss in probabilistic scenarios, including games and business applications.

Understand and apply the concepts of conditional probabilities, including false positives and false negatives in screening tests.

Interpret and create probability distributions for discrete random variables and calculate related probabilities.

Understand the concepts of independence and dependence between two events.

---

Definitions:

Mg/dL

Milligrams per deciliter, a measurement unit commonly used in blood tests to express the concentration of substances.

Sample Proportion

The fraction or percentage of items in a sample that are part of a certain category or possess a certain attribute.

Lab Sections

Divisions or subsets of a course where practical or experimental work is performed, often in a science or engineering context.

Statistic

Statistic is a number that represents a property of a sample, such as its mean or variance, used in statistical analysis to infer the properties of the population from which the sample was drawn.