Which of the Following Statements Is CORRECT

question 59

Multiple Choice

Which of the following statements is CORRECT?

• A) Net cash flow (NCF) is defined as follows:
• NCF = Net income - Depreciation and Amortization.
• 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 and Amortization
• -Capital expenditures required to sustain operations
• -Required changes in net operating working capital.
• D) Free cash flow (FCF) is defined as follows:
• FCF = EBIT(1 -T)+ Depreciation and Amortization + Capital expenditures.
• E) Net cash flow is the same as free cash flow (FCF).

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Definitions:

Natural Monopoly

A market condition where a single firm can supply a product or service at a lower cost than any potential competitor, often due to economies of scale.

Large Fixed Costs

Expenses that do not change in total regardless of changes in the volume of goods or services produced.

ATC

Average Total Cost, which is calculated by dividing the total cost of production by the quantity of output produced.

Price Elasticity Of Demand

The ratio of the percent change in the quantity demanded to the percent change in the price as we move along the demand curve.