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Which of the following statements about free cash flow is true? A : Significant free cash flow indicates less potential to finance new investments. B : Significant free cash flow indicates less potential to pay additional dividends. C : Free cash flow is not reported on the statement of cash flows. D : Free cash flow is most commonly calculated by subtracting capital expenditures from cash provided by operations and then adding cash dividends.

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Answer:

The correct answer is (C)

Explanation:

Free cash flow is calculated by subtracting operating cash flow from the expenditures. Free cash flow statement also known as FCF statement is generally the amount of cash left after paying all the expenditures. As it is the leftover amount it is not reported on the cash flow statement. This free cash flow amount is used to analyse how much a company can distribute among the stakeholders.

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