Free Cash Flow Refers to the Excess of Cash Inflows

question 101

True/False

Free cash flow refers to the excess of cash inflows over cash outflows.

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Definitions:

Payback Period Method

A capital budgeting method that calculates the time required to recoup the cost of an investment, identifying the point where cash inflows equal cash outflows.

Profitability Index

A calculation used to assess the attractiveness of an investment or project, equal to the present value of future cash flows divided by the initial investment cost.

Net Present Value

The difference between the current value of cash inflows and the current value of cash outflows over a period of time, used in capital budgeting to analyze the profitability of an investment.