A discretionary cash flow: A) remains available to a company after it funds its operating requirements and capital expenditures. B) results from profits. C) may be spent at the company’s discretion. D) remains available after a company services its debt.
I’m going with D. Disclosure: I have been overserved with booze and overly pumped about the mighty GAMECOCKS spring game tomorrow.
B? [whilst A & C look correct too]
A
I forget the definition but I am leaning towards A. I think discretionary cash flow is what you have before debt but after your fixed and working capital requirements. A I say.
According to CFAI level 2 Volume 5 page 16, discretionary CF is CFO - dividends, so my updated answer is C. Can’t be A because cap ex is CFI, and the definition says to reduce CFO by cap ex AND dividends.
A
so the answer is A. I had picked C, because like wyantjs mentions, discretionary cash flow is Free Operating CF- Dividends. I’m not happy with this question one bit. Clearly, dividends should also have been mentioned in A. W/ the mention of dividends, I don’t see how A is the correct answer.