Question

Free cash flow can be used for various reasons, including distributing it to stockholders and debtholders. Which of the following is not a use of free cash flow?Acquiring operating assetsRetiring debt—that is, to pay off debt

Answer 1

Answer:

The correct answer is letter "A": Acquiring operating assets.

Explanation:

Free cash flow refers to the available money a company has after covering all its liabilities and expenses. This money is usually distributed among the firm's investors -stakeholders- and creditors. The Free Cash Flow is not equal to net income because it does not include non-cash expenses but takes into consideration the expenses on company equipment and changes in working capital.

Then, the free cash flow is not destined for acquiring operating assets.