Which of the following is true for free cash flow?
I. Free cash flow is easier to calculate than operating cash flow.
II. Estimated capital expenditures are subtracted from operating cash flow.
III. Estimated capital expenditures are added to operating cash flow.
IV. A negative free cash flow indicates that the company needs additional financing.

A) III & IV
B) II & IV
C) I, II, & III
D) I & III

Question

Which of the following is true for free cash flow?
I.	Free cash flow is easier to calculate than operating cash flow.
II.	Estimated capital expenditures are subtracted from operating cash flow.
III.	Estimated capital expenditures are added to operating cash flow.
IV.	A negative free cash flow indicates that the company needs additional financing.

A) III & IV
B) II & IV
C) I, II, & III
D) I & III

Quizplus · Accepted Answer

II & IV are correct. Free cash flow is calculated by subtracting estimated capital expenditures from operating cash flow, not adding them. A negative free cash flow indicates the company is spending more than it earns, suggesting a need for additional financing. Calculating free cash flow is not necessarily easier than operating cash flow; it's an additional step beyond calculating operating cash flow.

Which of the Following Is True for Free Cash Flow