Question

Accounting statements represent a company's earnings, but this is not the real cash that a company generates. Earnings data can be manipulated and can be deceiving. Thus, corporate decision makers and security analysts focus on the free cash flow that a firm generates to analyze the company's real cash position. Which of the following statements best describes free cash flow?
The excess cash generated by revenues less all operating expenses
The cash flow available for distribution to all investors after the company has made all investments in fixed assets and working capital necessary to sustain a firm's ongoing operations

Answer 1

Answer:

The cash flow available for distribution to all investors after the company has made all investments in fixed assets and working capital necessary to sustain a firm's ongoing operations

Explanation:

Free cash is an important factor in which the stockholder's are interested. Free cashflow determine the actual cash position that is available for the stockholder's after fulfilling all the capital and operational requirements. Its is the the net value of cash from operations and any capital expediture. Investors want see thaat if company has enough cash for dividend payment.