Which of the following should not be considered a viable use of free cash flows as we have defined them?
Pay dividends
Repay principal on debt
Pay for current capital expenditures
Save for future projects
Free cash flows of a firm includes cash flow to the stakeholders of a firm including debt and common stock holders.
So any payment to equity stakeholder and towards debt would be a use of cash flow.
Also, a company with positive cash flow can expend on capital investments.
Dividends are paid to equity holders
Principal repayment is done to debt investors
Hence dividends, repayment of principal and capital expenditure is a use of free cash flow
Correct choice : D Save for future projects
Saving for future projects is not a use of cash flow but a planning process of cash flow
Which of the following should not be considered a viable use of free cash flows as...