Free cash flow (FCF) :A) When positive indicates the operating cash flow of a firm provides enough cash for asset growth and may result in something for shareholders.B) Is calculated by subtracting the increase in gross fixed assets and increase in current assets from the operating cash flow of a firmC) Provides an estimate as the whether a company will provide cash or require cash in the future.D) All of the above

Question

Free cash flow (FCF) :A) When positive indicates the operating cash flow of a firm provides enough cash for asset growth and may result in something for shareholders.B) Is calculated by subtracting the increase in gross fixed assets and increase in current assets from the operating cash flow of a firmC) Provides an estimate as the whether a company will provide cash or require cash in the future.D) ​All of the above

Maxine Mullen · Accepted Answer

Final Answer : D, Explanation :  Free cash flow (FCF) is calculated by subtracting capital expenditures (increase in gross fixed assets) and net working capital (increase in current assets) from operating cash flow. When FCF is positive, it indicates that the operating cash flow of a firm provides enough cash for asset growth and may result in something for shareholders. FCF also provides an estimate as to whether a company will provide cash or require cash in the future. Therefore, all of the above choices are correct.

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