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 |
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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