Question

One way to think about free cash flow is that if the amount were withdrawn, it would harm the firm's ability to operate and to produce future cash flows.
A. True
B. False

Answer 1

The given statement "One way to think about free cash flow is that if the amount were withdrawn, it would harm the firm's ability to operate and to produce future cash flows" is FALSE.

Explanation:

Free flow of cash is the cash produced by an enterprise, less than the cost of asset spending. Free cash flow is the remaining cash after a corporation pays the operating costs and the equity, also called CAPEX.

FCF conflates net income through adjustments to non-cash spending, working capital shifts and capital expenditure.

The FCF is prone to volatility rather than net income as an indicator of profitability.

Nonetheless, FCF can expose basic problems until they emerge from the income declaration as a additional tool for analysis.