FINC 409 Exam 2 Review
Free cash flow is defined as:
Cash flows available for payments to stockholders and debt holders of a firm after the firm has made investments in assets necessary to sustain the ongoing operations of the firm.
How does a decrease in Current Liabilities affect cash?
Decreases cash
How does an increase in Current Assets (other than cash) affect cash?
Decreases cash
As a metric for free cash flows of the firm, EBITDA is the revenue less the cost of goods sold, sales general and administrative costs, depreciation, interest and taxes.
False
T/F? Accounting earnings or bottom-line net income is an accurate representation of the cash creation of the firm.
False
Cash flows available to pay the firm's stockholders and debt holders after the firm has made the necessary working capital investments, fixed asset investments, and developed the necessary new products to sustain the firm's ongoing operations is referred to as:
Free cash flow
This is cash flow available for payments to stockholders and debt holders of a firm after the firm has made investments in assets necessary to sustain the ongoing operations of the firm.
Free cash flow
The firm sells a piece of equipment no longer needed for operation. This asset has a book value of $1,000. What impact does this sale have on Free Cash Flow?
Increases FCF
A piece of equipment costs $2,500. If this asset depreciates on a 5-year schedule, the Net Fixed Asset value on the Balance sheet in year 2 will be more or less than this same asset depreciating on a 3-year schedule?
More
Net operating profit after taxes (NOPAT) is defined as which of the following?
Net profit a firm earns after taxes, but before any financing costs
Which financial statement reports the amounts of cash that the firm generated and distributed during a particular time period?
The statement of cash flows
