cash flow from operations 800 purchase plant and equip 40 sale of land 30 issuance of debt 200 payment div 50 the companys free cash flow is a 540 b 590 c 760 d 790
800-40+30=790 D
why is div pmt div and issuance of debt not part of free cash flow? are they not cash components which should also be factored in?
FCF is the cash produced by operations. Financing activities (issue debt, retire stock, pay div) aren’t operations.
neither is ‘sale of land’ -@operations.i think the main reason is that dividends and debt issuance are discretionary
It’s nice that 740 isn’t an option. We had a thread about this a few days ago, and talked about whether or not FCF included dividends. Indeed I looked it up this morning, CFAI V3 pg 105 defines FCF as FCF=Net CFO-Dividends-Net Capital expenditures, but at the same time it seems more common to neglect them as I haven’t seen a question yet that they were incorporated.