Free Cash Flow Is Cash from Operations Less Cash Used

question 147

Multiple Choice

Free cash flow is cash from operations less cash used for

• A) investments in PP&E needed to maintain current operations
• B) dividends and cash to redeem bonds payable
• C) investments in PP&E needed to achieve desired future operations
• D) fixed assets needed to maintain current operations and cash to redeem bonds payable

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Definitions:

Cash Flows

The overall volume of cash inflows and outflows within a corporation, significantly affecting its liquid assets.

Operating Activities

The day-to-day actions that are involved in running a business, such as buying, selling, and producing goods or services.

Indirect Method

A way of preparing the statement of cash flows where net income is adjusted for changes in balance sheet accounts to calculate the cash from operating activities.

Operating

Refers to the day-to-day activities involved in running a business that are essential for generating revenue.