Which of the Following Statements Is False

question 57

Multiple Choice

Which of the following statements is false?

• A) Because only the tax consequences of depreciation are relevant for free cash flow, we should use the depreciation expense that the firm will use for tax purposes in our free cash flow forecasts.
• B) A firm generally identifies its marginal tax rate by determining the tax bracket that it falls into based on its overall level of pre-tax income.
• C) Free Cash Flow = (Revenues - Costs) × (1 - τ_c) - Capital Expenditures - ΔNWC + τ_c × Depreciation.
• D) Net working capital is the difference between current liabilities and current assets.

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Definitions:

Inventory Purchase

The acquisition of goods and materials that a company intends to sell or use in production, recorded as an asset on the balance sheet until sold.

Financing Activity

Transactions and events where cash is obtained from or repaid to investors and creditors, excluding those relating to operating and investing activities.

Capital Stock

The total amount of a company's share equity including both common and preferred shares, representing the initial investment in the business.

Free Cash Flow

A measure that assesses a company’s ability to fund its capital expenditures and dividends from its net cash provided by operating activities.