Practice
Check your answer
Choose a response, then check the answer and explanation.
Average total assets are 1,250,000, and average total equity is 500,000 for the same annual period. Net cash provided by operating activities is 180,000. Capital expenditure is 95,000, and dividends paid are 25,000. The company defines free cash flow as operating cash flow less capital expenditure and dividends.
Free cash flow is not a defined term in United States GAAP, so a comparison across two companies is only as good as the definitions behind it. Reading the definition comes before reading the number.