Which of the Following Best Represents Cash Flows to Investors

question 6

Multiple Choice

Which of the following best represents cash flows to investors?

• A) Cash flow from operating activity, plus cash flow generated from net working capital
• B) Earnings before interest and taxes times 1 minus the firm's tax rate
• C) Net income minus dividends paid to preferred stockholders.
• D) Cash flow from operating activity minus cash flow invested in net working capital minus cash flow invested in long-term assets.

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Definitions:

Cash Ratio

A liquidity ratio that measures a company's ability to pay off its short-term liabilities with its cash and cash equivalents.

Current Liabilities

Short-term obligations that will be paid or settled within the coming year in cash, goods, other current assets, or services.

Gross Profit Percentage

A financial metric that shows the proportion of profit a company makes after subtracting the cost of goods sold from its total revenue.

Net Sales Revenue

The amount of revenue generated from sales after deducting returns, allowances for damaged goods, and discounts.