Which cash flow calculation method does not account for interest or debt payments?

Unlock all questions

This demo includes only 20 questions. Upgrade to access hundreds of questions, flashcards, exam simulations, and disable ads.

Full question bankExam simulationsFlashcards
From $24.99Unlock all

Prepare for the PJT Super Day Test with our dynamic quiz. Study using flashcards and multiple-choice questions complemented with hints and explanations. Ensure you're ready for the big day!

Multiple Choice

Which cash flow calculation method does not account for interest or debt payments?

Explanation:
Unlevered Free Cash Flow is the correct method because it measures a company's cash flow without considering the effects of capital structure, including interest payments and debt. This calculation provides a clear view of a firm's operational performance by focusing solely on the cash generated by its core business operations. In contrast, Levered Free Cash Flow provides insights into the cash flow available to equity holders after accounting for interest payments, emphasizing the impact of the company’s debt. Operating Cash Flow is related to the cash generated from operating activities but does not reflect the overall cash available to investors since it can still be influenced by debt obligations. Free Cash Flow to Equity also incorporates interest payments, as it determines the cash flow available to equity shareholders after considering all expenses, including debt servicing.

Unlevered Free Cash Flow is the correct method because it measures a company's cash flow without considering the effects of capital structure, including interest payments and debt. This calculation provides a clear view of a firm's operational performance by focusing solely on the cash generated by its core business operations.

In contrast, Levered Free Cash Flow provides insights into the cash flow available to equity holders after accounting for interest payments, emphasizing the impact of the company’s debt. Operating Cash Flow is related to the cash generated from operating activities but does not reflect the overall cash available to investors since it can still be influenced by debt obligations. Free Cash Flow to Equity also incorporates interest payments, as it determines the cash flow available to equity shareholders after considering all expenses, including debt servicing.

More Multiple Choice Questions
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy