When Calculating a Firm's Free Cash Flow from Earnings Before

question 82

Multiple Choice

When calculating a firm's free cash flow from earnings before interest and taxes we must add back depreciation,amortization and depletion expense and allowances because

• A) they are non-cash expenditures.
• B) the accounting method for reporting such expenses may be different from that reported to the taxing authority.
• C) they approximate the value of fixed asset purchases during the year.
• D) they are unrelated to the amount of taxes paid during the year.

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Definitions:

Learned Needs Theory

A theory suggesting that individuals' needs are acquired over time based on their life experiences, affecting motivation and behavior in organizations.

Personalized Power

This refers to power used for personal gain, often without regard for others, focusing on self-centered objectives.

Expectancy Theory

A theory in motivational psychology that describes the motivational force as a function of an individual's belief in the likelihood of achieving desired performance levels and the perceived rewards associated with those levels.

P-to-O Expectancy

The belief that putting in a certain amount of effort (Performance) will lead to a specific outcome (Outcome) in the context of expectancy theory.