The Term Incremental in the Context of Incremental After-Tax Free

question 73

True/False

The term incremental in the context of incremental after-tax free cash flows refers to the fact that the firm's total after-tax free cash flows will change if the new project is adopted.

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Definitions:

Operating Segment

A component of a company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses related to transactions with other components of the same company.

Consolidated Assets

The total assets of a parent company and its subsidiaries, combined into one financial statement as if they were a single entity.

Asset Test

A measure of a company's liquidity, calculated by comparing its most liquid assets to its current liabilities.

Operating Segments

Components of an enterprise that engage in business activities from which it may earn revenues and incur expenses, whose operating results are reviewed regularly by the enterprise's chief operating decision maker.