Free Cash Flow Is Defined as

question 56

Multiple Choice

Free cash flow is defined as

• A) cash flows available for payments to stockholders of a firm after the firm has made payments to all others with claims against it.
• B) cash flows available for payments to stockholders and debt holders of a firm after the firm has made payments necessary to vendors.
• C) cash flows available for payments to stockholders and debt holders of a firm after the firm has made investments in assets necessary to sustain the ongoing operations of the firm.
• D) cash flows available for payments to stockholders and debt holders of a firm that would be tax-free to the recipients.

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Definitions:

Goods and Services

The output of an economy that satisfies consumer or business needs, where goods are physical items and services are intangible activities or benefits.

Capital Spending

Expenditures by businesses to acquire or upgrade physical assets such as property, industrial buildings, or equipment to increase their capacity or efficiency.

Incorporating

The process of legally declaring a business as a corporation, providing it with specific legal rights and protections.

Limited Liability

A legal structure that limits the personal financial responsibility of shareholders, partners, or owners for company debts and obligations.