Question

Pfister corporation reports $582 million in net income. This is the amount of cash available to distribute to shareholders.a. Trueb. False

Answer 1

Answer: False

Explanation:

The Net Income also takes into account cash that has not been paid yet from credit sales as well as other non-cash expenses. It is therefore not a measure of how much cash is available to be distributed to shareholders.

The amount that represents the cash available to distribute to shareholders is called the Free Cash Flow to the Firm (FCFF) and accounts for the actual amount of cash available in the company for disbursement.