Question

The amount of cash that remains after deducting the funds a company must commit to continue...

The amount of cash that remains after deducting the funds a company must commit to continue operating at its planned level is called:

A. Free cash flow B. Cash flow to assets C. Cash flows to sales D. Cash flow yield

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Answer #1

The amount of cash that remain s after deducting the funds a company must commit to continue operating at its planned level is called FREE CASH FLOWS.

Free cash flows are an important indicator of an organisation's financial health and its openness to invest into new businesses or expanding its current business.

There can be number of reasons because of which an organisation can generate free cash flows. Some of them can be:-

1. Selling major corporate assets.

2. Large advance received from a customer.

3. Delaying capital expenditures.

4. Cutting on non business expenditures.

Formula for free cash flows is cash flow from operations less capital expenditure.

Hence option "A" is the correct answer.

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