Question

Cash flow to stockholders is defined as: A) the total amount of interest and dividends paid during the past year. B) the change in total equity over the past year. C) cash flow from assets plus the cash flow to creditors. E) dividend payments less net new equity raised. D) operating cash flow minus the cash flow to creditors.

Answer 1

Answer:  E) dividend payments less net new equity raised.

Explanation:

Cash flow to shareholders for a given period refers to how much cash was spent on Equity for the period. As such the cash flow will be the difference between the cash outflow of paying dividends and the cash inflow of paying Equity.

When dividends are paid, this is cash going to shareholders and so it reduces cash that the company has. When Equity is raised, it brings in cash from the shareholders and increases a company's cash. The difference is therefore the net cash flow to stockholders.