Ch.10 · Risk Measures and Ratios · hard
What is 'free cash flow' (FCF) and why is it an important indicator for equity fund managers?
0% of students got this wrong
EXPLANATION
Free Cash Flow = Operating Cash Flow - Capital Expenditure. FCF is the cash a company generates after maintaining and expanding its asset base. Companies with strong FCF can fund growth, pay dividends, reduce debt, or buy back shares — all shareholder-friendly activities. Fund managers use FCF analysis to distinguish between companies with genuine earnings vs accounting profits.
Practising Chapter 10 one question at a time?
Try the full chapter — 100 questions, tracked score, weak area breakdown.