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Which of the following is not a use of free cash flow? Pay dividends to shareholders...

Which of the following is not a use of free cash flow?

Pay dividends to shareholders

Pay interest to creditors

Pay off debt

Purchase inventory
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Answer #1

Option B is correct

Pay interest to creditors is not a use of free cash flow because free cash flow is obtained after paying interest to creditors.

Option A is incorrect because paying dividend to shareholders is a use of free cash flow

Option C is incorrect because paying off debt with free cash flow decreases interest expenses and it is a use of free cash flow

Option D is incorrect because the firm can use free cash flow to purchase additional inventory

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