Financial Management - Study Mode

[#251] Net operating profit after taxes is Rs 4500, net investment in operating capital is Rs 8500 and then free cash flow would be
Correct Answer

(A) -Rs 4,000.00

Explanation

Solution: Free cash flow = Net operating profit after taxes - Net investment in operating capital = 4500 - 8500 = Rs. -4000.

[#252] Net investment in operating capital is subtracted from net operating profit after taxes to calculate
Correct Answer

(B) free cash flow

Explanation

Solution: Net investment in operating capital is subtracted from net operating profit after taxes to calculate free cash flow. Free cash flow represents the cash a company generates after cash outflows to support operations and maintain its capital assets.

[#253] Project which is started by firm for increasing sales is classified as
Correct Answer

(A) new expansion project

Explanation

Solution: Project which is started by firm for increasing sales is classified as new expansion project. These are projects where the firm seeks to profitably increase sales of current products or introduce new products into the market.

[#254] Real interest rate and real cash flows do not include
Correct Answer

(C) inflation effects

Explanation

Solution: Real interest rate and real cash flows do not include inflation effects. Inflation may or may not result in an increase in production. As long as the economy does not reach the full employment stage, inflation has a favorable effect on production. Usually, as the price level increases, profits increase too.

[#255] Gross fixed asset expenditures is Rs 6000 and free cash flow is Rs 8000 then operating cash flows will be
Correct Answer

(B) Rs 2,000.00

Explanation

Solution: Operating cash flow = Free cash flow - Fixed expenditure = 8000 - 6000 = Rs. 2000.